Re Lewis Merthyr Collieries. Lloyds Bank v The Company
| Jurisdiction | England & Wales |
| Date | 1929 |
| Year | 1929 |
| Court | Court of Appeal |
Company - Debentures - Floating Charge - Fixed Charge - Receiver - Preferential Creditors - Priority -
The Companies (Consolidation) Act, 1908, s. 107, sub-s. 1, provides “Where, in the case of a company registered in England or Ireland, …. a receiver is appointed on behalf of the holders of any debentures of the company secured by a floating charge …., then, if the company is not at the time in the course of being wound up, the debts which in every winding-up are under the provisions of Part IV. of this Act relating to preferential payments to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver …. in priority to any claim for principal or interest in respect of the debentures”:—
Held, that when the receiver is appointed by a debenture holder whose debenture is secured by both a fixed charge and a floatings charge, the priority given to the preferential debts applies only in respect of assets subject to the floating charge and not to assets subject to the fixed charge.
ADJOURNED SUMMONS.
The plaintiffs, Lloyds Bank, Ld., were the holders of a first debenture issued by the defendant company, Lewis Merthyr Consolidated Collieries, Ld., by virtue of a deed dated January 18, 1924. By clause 1 the defendant company (inter alia) agreed to pay the plaintiffs on demand all moneys and liabilities which were then or at any time thereafter due or owing by the company to the plaintiffs, or for which the company might be or become liable to the plaintiffs on any account or in any manner whatever. By clause 3 the company as beneficial owner thereby charged with the payment of all moneys and liabilities thereby agreed to be paid or intended to be thereby secured ….; and so that the charge thereby created should be a continuing security: firstly, the freehold leasehold and copyhold property of the company, both present and future, and the fixed plant machinery and fixtures (including trade fixtures) from time to time thereon, secondly, the goodwill and the uncalled capital of the company both present and future, and thirdly, the undertaking and assets of the company both present and future. And it was thereby further declared that the charge thereby created should as regards the premises firstly and secondly described be a fixed first charge, and as to the premises thirdly described should be a floating charge, but so that the company should not without the consent in writing of the plaintiffs (the Rank) create any mortgage or charge upon and so that no lien should in any case or in any manner arise on or affect any part of the said premises thirdly described ranking either in priority to or pari passu with the charge thereby created. And it was further provided by clause 6 that the plaintiffs might by writing as therein mentioned appoint a receiver or receivers of the premises thereby charged or any part thereof.
A second debenture for 50,000l. was issued to the plaintiffs by the defendant company on November 25, 1926, and by such debenture the defendant company thereby charged with the payment of such sum its undertaking and all its property and assets, both present and future, including its uncalled capital for the time being. And it was laid down as one of the conditions subject to which such debenture was issued, that it was one of a series of second debentures, issued or proposed to be issued for securing an aggregate principal sum not exceeding 250,000l., and that the debentures of such series were all to rank pari passu without any preference or priority one over another as a second charge on the property thereby charged, and next after the first debenture dated January 18, 1924, in favour of the plaintiffs, as a continuing security for the payment to the plaintiffs of all moneys and liabilities from time to time owing or incurred by the company to the plaintiffs, whether before or after the issue of the debentures of the second series or any of them, …., and the charge created by such second debenture was to be a floating security, save that the defendant company was not to be at liberty to create any mortgage or charge on its undertaking property or assets or any part thereof ranking pari passu with or in priority to the debentures of the second series. …. In the same debenture was also contained a power to appoint a receiver of the defendant company's undertaking property and assets thereby charged.
On February 8, 1928, the plaintiffs, as holders of the first debenture dated January 18, 1924, and the second debenture above mentioned, commenced an action against the defendant company claiming a declaration that the said first debenture and the said second debenture constituted charges upon all the property and assets of the defendant company comprised therein.
By an order on motion dated February 14, 1928, Leonard D. Williams and Bernard E. Brown were appointed receivers on behalf of the plaintiffs and all other holders of the first debenture and second debentures issued by the defendant company of all the property and assets of the defendant company (except uncalled capital) comprised in or subject to the charge created by the said debentures, and to manage the business of the defendant company.
By an order dated April 12, 1928, made on a summons in the action, it was (inter alia) ordered that the Rhondda Urban District Council (who were claimants in respect of rates) be at liberty to attend the proceedings in the action; and it was further ordered that two conditional contracts for the sale of the defendant company's freehold and leasehold properties and assets be carried into effect. By a further order dated April 27, 1928, made on summons, it was ordered that one Frederick Densley, a member of the South Wales Miners' Federation, who claimed to be entitled to compensation for injuries sustained while an employee of the defendant company, be appointed to represent the class of workmen claiming to be entitled to compensation from the defendant company under the
A further summons in the action was now taken out by the plaintiffs for a declaration that the preferential payments required by the Companies (Consolidation) Act, 1908, s. 107, to be paid in priority to all other debts of the defendant company, were payable only out of such assets of the defendant company as were comprised in or subject to the floating charge created by the first debenture of the defendant company dated January 18, 1924, and held by the plaintiff bank, and were not payable in priority to the moneys secured by the said debenture out of such assets of the defendant company as were comprised in or subject to the first fixed charge created by the said debenture.
It was claimed on behalf of the plaintiffs that they were secured creditors for over 439,000l., which included both the amount secured by the first debenture and the second debenture. The preferential creditors were estimated at about 175,000l., of which about 125,000l. was in respect of the claims for compensation put forward by workmen, employees of the defendant company.
The summons came on for hearing before Tomlin J. on July 16, 1928.
W. Greene K.C. and H. C. Bischoff for the plaintiff bank. This is a summons involving the construction of the Companies (Consolidation) Act, 1908, ss. 107 and 209.F1
[TOMLIN J. It really only involves s. 107, as s...
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