Sharp v Thomson
| Jurisdiction | England & Wales |
| Judgment Date | 27 February 1997 |
| Date | 27 February 1997 |
| Docket Number | No. 7. |
| Court | House of Lords |
HL
Lord Browne-Wilkinson, Lord Keith of Kinkel, Lord Jauncey of Tullichettle, Lord Steyn and Lord Clyde.
Heritable property and conveyancingTrustConstructive trustSale of heritageDisposition delivered but not yet recordedFloating charge crystallising after deliveryRights of disponeeWhether disponee had real rightWhether disponee had personal rightWhether disponer held subjects in constructive trust for disponeeCompanies Act 1985 (cap 6), sec 462(1)1Insolvency Act 1986 (cap 45), sec 53(7)2
Rights and securityCompanyFloating chargeHeritable property and conveyancingCompany granting disposition of subjects prior to appointment of receiverDisposition unrecorded at date of appointmentWhether subjects attached by floating chargeCompanies Act 1985 (cap 6), sec 462(1)1Insolvency Act 1986 (cap 45), sec 53(7)2
Words and phrasesStatutory interpretationPropertyCompanies Act 1985 (cap 6), sec 462(1)1Insolvency Act 1986 (cap 45), sec 3(7)2
A couple concluded missives for the purchase of a flat from a company. The conveyancing formalities having been gone through, the disposition was delivered to the couple's agents on 9 August 1990 and recorded in the Register of Sasines on 21 August 1990, with date of entry being 14 April 1989. Receivers were appointed to the company on 10 August 1990 by instrument of
appointment executed by a bank as holders of a floating charge granted by the company registered on 16 July 1984. The receivers then brought an action against the couple and the building society, in whose favour the couple had granted a standard security which had been recorded at the same time as the disposition. The receivers argued that the flat had remained the property of the company as at the date of their appointment and was attached by the floating charge which had crystallised on that date. The defenders contended that delivery of the disposition had been effective to remove the subjects from the property of the company, as that word was properly understood, and thus from the scope of the floating charge. The Lord Ordinary (Penrose) granted decreede plano. The building society reclaimed to the Inner House of the Court of Session. The First Division affirmed the Lord Ordinary's judgment. The building society thereafter appealed to the House of LordsHeld (rev judgment of the First Division) (1) that the purpose of registration was not to strengthen the position of the grantee of the deed against actings on the part of the granter, but to enable third parties to deal with a registered proprietor safe in the knowledge that there were no hidden qualifications or impediments in his title and, in addition, a recorded title was in normal circumstances good against third parties as well as the granter; (2) that the word property was not a technical legal expression and the words property and undertaking in sec 462(1) of the Companies Act 1985 had to be construed in a practical and realistic way having regard to the context in which the expression occurred; (3) that the purpose of a floating charge was to provide security to the holder in preference to the general creditors and the role of a receiver, once appointed, was to deal with the property of the company to which the floating charge had attached in such a way as to satisfy the debt thereby secured but there was nothing in the legislation which specifically conferred on a receiver the right to do that which the company could not have done so that when reference was made to property and undertaking the words had to be given the practical meaning of property which was available for the use of the company, in which it had a beneficial interest, and which it was in law entitled to dispone or subject to heritable security, the statutory provisions being concerned with what was lawfully available to satisfy a company's obligations to the holder of a floating charge and not with formalities of feudal title; and (4) that at the time when the floating charge crystallised by the appointment of the receivers, the company held the recorded title to the flat but had no beneficial interest therein and the ability to grant deeds in fraud of the disposition to the couple did not amount to a right of property in law, the effect of sec 53(7) of the 1986 Act being to make available as security all the property in which the company had a beneficial interest so that (5) as the company had no such interest in the flat at the date of crystallisation, it followed that the floating charge did not attach thereto; and appeal allowed.
Authorities considered.
(In the Court of Session, 4 May 19951995 SC 455)
Neil Muir Sharp And Ian Patrick Souter, the joint receivers of Albyn Construction Limited, brought an action against (primo)Steven Thomson and Carol Thomson; and (secundo) Woolwich Building Society in which they concluded for declarator (a) that a floating charge granted by Albyn Construction Limited in favour of the Governor and Company of the Bank of Scotland dated 2 July and registered in the Register of Charges on 16 July 1984, which had crystallised on 10 August 1990, attached to subjects known as and forming a basement flat at 10 Whinhill Road, Aberdeen; (b) that that floating charge operated as a fixed security with priority over a standard security executed by the first defenders in favour of the second defenders recorded in the Register of Sasines on 21 August 1990; and (c) that they were entitled to exercise the powers conferred upon them by the charge and by sched 2 to the Insolvency Act 1986 and in particular that they were entitled to take possession of the subjects and sell or otherwise dispose of them.
The cause called before the Lord Ordinary (Penrose) in the procedure roll on the parties' preliminary pleas in law.
At advising, on 11 May 1994, the Lord Ordinary repelled the defenders' pleas and pronounced decree de plano. [See Sharp v. ThomsonSC 1994 SC 122.]
The second defenders reclaimed.
The reclaiming motion called before the First Division, comprising the Lord President (Hope), Lord Sutherland and Lord Coulsfield, for a hearing.
At advising, on 4 May 1995, the First Division refused the reclaiming motion. [See Sharp v. ThomsonSC 1995 SC 455.]
The second defenders appealed to the House of Lords.
Cases referred to:
Bank of Scotland v. Liquidators of Hutchison Main & Co Ltd 1914 SC (HL) 1
Bowman v. Wright (1877) 4R 322
Carse v. CoppenSC 1951 SC 233
Fife, Earl of v. Duff (1862) 24D 936
Forbes's Trustees v. Macleod (1898) 25R 1012
Gibson v. Hunter Home Designs Ltd (In Liquidation)SC1976 SC 23
Heritable Reversionary Co Ltd v. Millar (1891) 18R 1166; (1892) 19R (HL) 43
Hinkelbein v. Craig (1905) 13 SLT 84
Mitchells v. Ferguson (1781) Mor 10296
Morrison v. Harrison (1876) 3R 406
National Commercial Bank of Scotland Ltd v. Liquidator of Telford Grier Mackay & Co LtdSC 1969 SC 181
Strachan v. McDougle (1835) 13S 954
Thomas v. Lord AdvocateSC 1953 SC 151
Young v. Leith (1844) 6D 370; (1847) 9D 932
Textbooks referred to:
Halliday, Conveyancing Law and Practice (2nd edn), vol I, para 113
Craigie, Heritable Rights (3rd edn), p 434
Gloag & Irvine, Rights in Security, pp 29 & 33
Goudy, Bankruptcy (4th edn), p 251(c)
Craig, Jus Feudale III i no 6, vol II, p 891
The appeal was heard in the House of Lords before Lord Browne-Wilkinson, Lord Keith of Kinkel, Lord Jauncey of Tullichettle, Lord Steyn and Lord Clyde.
At delivering judgment, on 27 February 1997
LORD BROWNE-WILKINSONMy Lords, I have read in draft the speeches prepared by my noble and learned friends Lord Jauncey of Tullichettle and Lord Clyde. For the reasons which they give, I would allow the appeal.
LORD KEITH OF KINKELMy Lords, for the reasons set out in the speeches prepared by my noble and learned friends Lord Jauncey of Tullichettle and Lord Clyde, which I have read in draft and with which I agree, I would allow this appeal. The first plea-in-law for the appellants should be sustained and the action dismissed.
LORD JAUNCEY OF TULLICHETTLEMy Lords, this appeal raises the question of what is meant by the word property in a floating charge and in sec 53(7) of the Insolvency Act 1986 (the Act of 1986), which provides for the effect of the appointment of a receiver by the holder of such a charge in the following terms. [His Lordship quoted sec 53(7) as set out above and continued:]
The facts may be summarised as follows.
(1) On 2 July 1984 Albyn Construction Ltd (Albyn) granted a floating charge over the whole of its property which might from time to time be comprised in our property and undertaking. The floating charge was duly registered with the Registrar of Companies.
(2) Albyn entered into missives with a brother and sister, the Thomsons, for sale of a flat in Aberdeen at a price of 40,000 which was duly paid by the Thomsons, having been borrowed from the appellants. Entry was given on 14 April 1989.
(3) On 9 August 1990 Albyn delivered an executed disposition of the flat to the Thomsons' solicitors.
(4) On 10 August 1990 the respondents were appointed as receivers by the holders of the floating charge.
(5) On 21 August 1990 the disposition together with a standard security granted by the Thomsons to the appellants were recorded in the general Register of Sasines.
(6) Thereafter a dispute arose between the respondents on the one hand and the Thomsons and the appellants on the other as to whether the floating charge attached to the flat on 10 August 1990.
In 1992 the respondents raised an action against the Thomsons and the appellants for a declarator, inter alia, that the floating charge attached to the flat on their appointment as receivers, and that they were entitled to exercise their power to sell it. After a hearing in procedure roll the Lord Ordinary granted decree de plano and the First Division adhered. In the course of a carefully reasoned judgment, during the course of which he analysed many authorities, the Lord President concluded that, since in the...
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