Re Molton Finance Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE DIPLOCK
Judgment Date03 October 1967
Judgment citation (vLex)[1967] EWCA Civ J1003-1
Date03 October 1967

[1967] EWCA Civ J1003-1

In The Supreme Court of Judicature

Court of Appeal

Civil Division

From Mr Justice Pennycuick

Before:

The Master of the Rolls

(Lord Denning)

Lord Justice Danukwerts and

Lord Justice Diplock

In the Matter of Molton Finance Limited
and
In the Matter of the Companies Act, 1948

MR M.J. ALBERT, Q.C. and PAUL BAKER (instructed by Messrs Worrell, Fordyve & Lys) appeared as Counsel for the Appellants.

MR MUIR HUNTER, Q.C. and MR W. GRAETZ (instructed by Messrs Gouldens) appeared as Counsel for the Respondent.

THE MASTER OF THE ROLLS
1

Early in 1965 a firm of stockbrokers, Victor Levett & Co., Members of the London Stock Exchange, lent a sum of £15,000 to Theo Garvin Limited., or to its subsidiary Company, Molton Finance Ltd. They took as security some documents. Unfortunately the charge which they created was not registered within the twenty-one days required by Section 95 of the Companies Act 1948. On the 9th July, 1965, both Companies went into liquidation. So the charge is void under the section. But it is contended here today, as it was before the Judge, that nevertheless the stockbrokers have a lien on the documents as a separate and independent right apart from the charge which has been avoided.

2

I will give the facts in a little more detail because there are some subsidiary points arising on them. As long ago as November 1963 a Company called Molton Finance Limited. lent to a Mr Winfield a sum of £8,000; and Mr Winfield charged certain property, a boating make at St. Osyth, with the repayment of that sum. In December 1963 Molton Finance lent to a Mr Hennessy £9,000; and Mr Hennessy charged two properties, one in Willesden and the other in Kensington, with the repayment of that sum. A year or two later Holton Finance itself wanted money. In 1965 it borrowed £15,000 from the stockbrokers, Victor Levett & Co. In order to secure repayment, they gave to the stockbrokers sub-charges. They deposited with the stockbrokers the deeds and documents of the boating lake on the terms of a memorandum which said it was "to the intent that the same may be equitably charged with the repayment to the lenders of the sum of £15,000". They also deposited with the stockbrokers the charge certificates on the properties at Willesden and Kensington as further security for the £15,000, but no memorandum was drawn up about them. They gave notice to the Land Registry. But nothing at all was entered in the Company's register.

3

It appears that the £15,000 was paid not to Molton Finance but to its parent Company, The Garvin Limited., which heldall the shares in Molton Finance. I do not think anything turns on that point, because, accepting that the money was lent to Molton Finance, nevertheless the charge was avoided by Section 95 of the Companies Act. It was either a charge on land within Section 95(2)(d) or a charge on book debts under Section 95(2)(e); and not being registered, it was avoided as against the Liquidator and any creditor of the Company; and the Liquidator has so avoided it.

4

Although it is avoided, the stockbrokers say that they have the deeds and documents and they claim that although the charge is avoided, nevertheless they have a separate and independent lien, which means that they claim they can retain the documents until the debt of £15,000 is paid. The avoidance of the charge, they say, does not affect the debt and it does not affect the lien.

5

In support of that argument, they rely on a passage in Halsbury's Laws of England, Third Edition, Vol. 24, p. 143, which says: "Where an equitable mortgage is created...

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    ...Bank of India v Chartered Bank of India, Australia and China [1938] AC 287; [1937] 1 All ER 231 (distd) Molton Finance Ltd, In re [1968] Ch 325 (folld) NV Slavenburg's Bank v Intercontinental Natural Resources [1980] 1 WLR 1076; [1980] 1 All ER 955 (folld) R v Consolidated Churchill Copper ......
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    ...D Contracting Pty Ltd, Re [1970] QLR 101 (folld) Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (folld) Molton Finance Ltd, In re [1968] Ch 325 (folld) NV Slavenburg's Bank v Intercontinental Natural Resources Ltd [1980] 1 WLR 1076; [1980] 1 All ER 955 (distd) R v Registrar of Compan......
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    ...14.An equitable mortgage on land created by deposit of the title deeds is a charge within s 131(3)(e). See Re Molton Finance Ltd [1967] 3 All ER 843. There Lord Denning MR in giving the judgment of the Court of Appeal on the English Companies Act 1948 s 95(2)(d) stated at p 844: As long ago......
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