Re Monolithic Building Company. Tacon v The Company
| Jurisdiction | England & Wales |
| Date | 1915 |
| Year | 1915 |
| Court | Court of Appeal |
Company - Mortgages - Registration - Unregistered Mortgage - Notice - Priority -
Sect. 93 of the Companies (Consolidation) Act, 1908, avoids an unregistered mortgage as against a subsequent registered incumbrancer even though he had express notice of the prior mortgage at the time when he took his own security.
WITNESS ACTION.
The above company was incorporated as a private company on November 9, 1912.
By a mortgage dated March 3, 1913, the company conveyed certain freehold hereditaments at Barnet Gate to the plaintiff in fee simple by way of mortgage for securing the repayment with half-yearly interest of a sum of 500l. advanced by the plaintiff to the company.
The company's seal was affixed in the presence of the two managing directors, namely, the defendant Jenkins and another, and the secretary.
The company's solicitor acted for both parties in this transaction, but owing to a misapprehension of the law caused by a misstatement in a well-known text-book the mortgage, being a mortgage of land not for securing debentures, was not registered under s. 93 of the Companies (Consolidation) Act, 1908.F1
On June 12, 1913, the company issued a first mortgage debenture to the plaintiff to secure another advance of 800l. with half-yearly interest. This debenture stated that the 800l. advance was entirely independent and separate from the previous 500l. secured by the mortgage. The debenture created a floating charge on the company's undertaking and assets including the Barnet Gate property comprised in the mortgage.
The company's seal was affixed in the presence of the two managing directors and the secretary, and the debenture was registered on June 26, 1913.
On December 12, 1913, the company issued a second mortgage debenture to the defendant Jenkins to secure an advance of 500l. with half-yearly interest. This debenture was expressly subject to the plaintiff's debenture, but it did not mention the mortgage.
The company's seal was affixed in the presence of the defendant Jenkins and a new secretary who was also a director and the debenture was duly registered on December 24, 1913.
The indorsement on this debenture stated that it was “subject to prior incumbrances.” It was originally indorsed “subject to a prior incumbrance,” but there was no evidence when the alteration was made.
By a sub-mortgage dated March 3, 1914, the defendant Jenkins charged the moneys secured by his second debenture with the payment of certain moneys to the defendant Calway.
On March 13, 1914, Calway's solicitors gave the company's solicitor notice of this sub-mortgage, and pointed out that the mortgage of the plaintiff for whom he was also acting was void against the liquidator and any creditor for want of registration under s. 93.
By an order dated March 27, 1914, and made on the plaintiff's application against the company as sole respondent, the time for registration of the plaintiff's mortgage was extended until April 17, 1914, “without prejudice to the rights of parties acquired prior to the time when such mortgage shall be actually registered.” The mortgage was subsequently registered on April 3, 1914.
The mortgage interest due on March 3, 1914, was not paid and no interest had been paid on the first debenture.
On March 31, 1914, the plaintiff brought this action against the company and the defendants Jenkins and Calway to enforce her securities, claiming priority for her mortgage as well as her first debenture over the securities of the defendants Jenkins and Calway.
The priority of the first debenture was not contested, but the priority of the mortgage was contested on the ground that it had not been registered within twenty-one days of its creation, or at the time the securities of the defendants Jenkins and Calway were effected. The defendant Calway also relied on want of notice of the plaintiff's mortgage, but this point failed on the evidence.
The company appeared, but put in no defence, and as against them judgment went in default of defence.
The action came on for hearing before Astbury J. on October 19, 1914.
Hon. Frank Russell, K.C., and Lyttelton Chubb, for the plaintiff. The question is whether s. 93 avoids an unregistered mortgage against a subsequent registered incumbrancer with notice. Sub-s. 1 (d) provides that a mortgage or charge on any land “shall, so far as any security on the company's property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company,” unless the prescribed particulars of the mortgage or charge, together with the instrument, are delivered to the registrar for registration within twenty-one days after its creation. Sub-s. 2 provides that the registrar shall register the date, amount, short particulars of the property, and the names of the mortgagees. Sub-s. 7 provides that it shall be the duty of the company to send the particulars of the mortgage to the registrar, but registration may be effected on the application of any person interested therein. Sect. 96 enables the Court to extend the time for registration. Sect. 99 imposes penalties on the company and its officers for knowing and wilful default. In the present case, however, all parties to the transaction were misled by the text-book, and the non-registration arose from an innocent mistake.
Now s. 93 is merely an extension of the
The policy of the section is the same as that of the
[ASTBURY J. Does s. 93 affect a going company at all?]
A going company cannot repudiate an unregistered mortgage, but a creditor without notice can do so.
[ASTBURY J. A registered title can only be affected by clear and distinct notice, amounting to fraud: Chadwick v. Turner.F6]
The notice here was clear and distinct. There was no fraud in taking and registering the second debenture. No one knew the mortgage required registration. But when the necessity for registration was discovered, it became a quasi-fraud to take advantage of the omission.
Sir Charles Macnaghten, K.C., and J. W. Manning, for the defendant Jenkins. There are two kinds of registration of company securities — (a) registration in the company's register, and (b) registration with the registrar. The former was directed by the
The 1900 Act applied to mortgages for securing debentures, mortgage debentures, and other specified securities, but not to a mere mortgage of land. The was, however, included in the
The
Sect. 93 is quite different. Registration is obligatory. There is a time limit with a provision for extending it. Penalties are imposed in default of registration, and the security is avoided not merely against subsequent mortgagees of the same property who register, but against all creditors. It is no longer a case of losing priority against registered securities, it is a case of absolute avoidance against any creditor.
This class of registration is very analogous to registration under the
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