Charge Registration
Cases
Peleton Ltd (in receivership) -v- Companies Acts
[2011] IEHC 479
Laffoy J.
“1.3 On this application the Applicant seeks an order pursuant to s. 106 of the Companies Act 1963 (the Act of 1963) extending the time for registration in the CRO of a “Deed of Charge” dated 20th October, 2004 entered into between Peleton Limited (the Company) of the one part and Allied Irish Bank Plc (the Bank) of the other part.
2. Section 106
2.1 Sub-section (1) of s. 106, insofar as it is material to this application, provides as follows:
“The court, on being satisfied that the omission to register a charge within the time required by this Act . . . was accidental, or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested, and on such terms and conditions as seem to the court just and expedient, order that the time for registration shall be extended, . . ..”
The notes on the Court’s jurisdiction under s. 106 and on the effect of an order under that section contained in MacCann and Courtney Companies Acts 1963 – 2009 (2010 Ed.) outline the current state of the law accurately.
4.5 To summarise the title position, the October 2004 Charge has been registered as a burden on Folio 3380L, having been lodged with the PRA in December 2008. However, as I have pointed out, the date of the lease under which the property is held by the Company is incorrectly stated in the schedule to the October 2004 Charge.
4.6 Returning to how the December 2004 Charge came into existence and how particulars thereof came to be filed in the CRO, I assume that Mr. Campbell did not have the benefit of seeing the certified copy of the documents lodged originally in the Land Registry and now held by the PRA. In my view, it is absolutely clear that the October 2004 Charge was not lodged in the Land Registry with the dealing on 15th November, 2004. Therefore, I believe the Company’s solicitors retained the original of the October 2004 Charge. The original has not been produced on this application. However, it seems from Mr. Campbell’s inquiries and investigations that the error in failing to have particulars of the October 2004 Charge delivered to the CRO, within the time limited by, and in accordance with, s. 99 of the Act of 1963, was identified at some point and that that led to the execution of the December 2004 Charge. What appears to have happened was that although the October 2004 Charge had been executed by the Company, that fact was ignored and a replica was executed by the Company and the date 21st December, 2004 was inserted in it. The original of the December 2004 Charge has been put before the Court, as I understand it, it having been received from the Company’s solicitors. The December 2004 Charge was never stamped, and, it would appear, was never intended to be acted upon by the Bank, although particulars of it were delivered to the CRO for registration as if it were an effective charge. Clearly this should not have happened. The Bank had the benefit of the October 2004 Charge and it apparently intended to rely on it. Accordingly, an application should have been made at that stage under s. 106 to extend the time to register the October 2004 Charge.
5. Conclusions and order
5.1 I am satisfied that the Applicant is a “person interested” who may seek relief under s. 106, having taken over the security of the Bank under the October 2004 Charge. I am also satisfied, on the basis of the evidence now before the Court in the form of Mr. Campbell’s affidavit, that the failure to deliver particulars of the October 2004 Charge to the CRO in accordance with s. 99 of the Act of 1963 was due to inadvertence on the part of the Bank, which has accepted that the delivery of the particulars was its responsibility. However, the manner in which the Bank set about rectifying the omission to register the particulars in accordance with s. 99 in December 2004 was wholly inappropriate. Therefore, as a condition to granting the relief sought on this application, I intend requiring the Bank to –
(a) give an undertaking to stamp the December 2004 Charge, and
(b) in accordance with the letter of 28th November, 2011, to give an undertaking to the Court confirming that it will not rely on the December 2004 Charge and will take all steps necessary to ensure that it cannot be relied on by executing a Deed of Release in favour of the Company and having a memorandum of satisfaction registered in the CRO.
5.3 The usual form of order made on an application under s. 106 contains a proviso that the order is without prejudice to the rights (if any) of parties acquired between the date of creation of the charge and the date of its actual registration in the CRO. While the general rule is that a subsequent chargee will have priority over a chargee who has failed to register in time, even though he had notice of the unregistered charge at the time he obtained his own charge, it is well settled that, if the subsequent charge is expressly subordinated to the earlier charge, the earlier charge will gain priority after late registration has been effected (Re Clarets Limited; Spain v. McCann [1978] ILRM 215).
5.5 Accordingly, subject to the Bank giving the undertaking referred to at para. 5.1 above, there will be an order extending the time for registration of the particulars of the October 2004 Charge for twenty one days from the date of perfection of the order, but the order will be expressly without prejudice to the rights, if any, of parties acquired between the date of the creation of the said charge and the date of actual registration.Finally, the order will amend the originating notice of motion to show that the application is brought by the Applicant.
5.6 Counsel for the Applicant referred the Court to s. 218 of the Act of 2009, which provides that an acquired bank asset is not invalidated or rendered void or voidable as against the Applicant by, inter alia, s. 99 of the Act of 1963. The conclusions set out above were not influenced by that provision.
Investment Options and Solutions Ltd -v- Companies Acts
[2010] IEHC 107
Laffoy J.
“5. Insofar as is relevant for present purposes, s. 106(1) provides as follows:
“The court, on being satisfied that … the omission or mis-statement of any particular with respectto any such charge … was accidental, or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested, and on such terms and conditions as seem to the court just and expedient, order … that the omission or mis-statement shall be rectified.”
There is a useful résumé of the effect of that provision in MacCann and Courtney on Companies Acts 1963-2006 2008 Ed. at p. 225, in which it is stated:
“An error in the particulars delivered to the Registrar will not affect the validity of the charge, once a certificate of registration has been issued pursuant to [the Act of 1963], s. 104. Courtney [The Law of Private Companies … para. 21.090] argues therefore that an application for rectification may be superfluous, particularly if the court were to impose the same conditions as are applied in the case of an order extending time. In any event, the jurisdiction conferred on the court by s. 106 only allows it to correct an omission or mis-statement in the delivered particulars and does not allow for the deletion of an entire entry. Furthermore, the court’s jurisdiction is confined to rectifying errors in the particulars which are required by law to be delivered to the registrar of companies: there is no jurisdiction to order the rectification of factual errors in particulars the delivery of which is not required by law.”
A number of points arise out of that résumé which require to be commented on in the context of this application.
7. First, s. 104 of the Act of 1963, which deals with the certificate of registration, provides:
“The registrar shall give a certificate under his hand of the registration of any charge registered in pursuance of this Part, stating the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with.”
The conclusiveness of the certificate of registration relates to compliance with the statutory registration requirements. There is a wealth of authority for the proposition that, because of the conclusiveness of the certificate, the registration of the charge cannot be challenged even when the registration requirements have not in fact been observed. On this application, counsel for the applicant relied on three Irish authorities: Lombard and Ulster Banking (Ireland) Ltd. v. Amurec Ltd. [1976-77) I.L.R.M. 222; Re Shannonside Holdings Ltd. (Unreported, High Court, Costello J., 20th May, 1993,) and Re Valley Ice-Cream (Ireland) Ltd. [1998] IEHC 119. Having regard to the effect of s. 104, a question arises as to whether this application is superfluous. Counsel for the applicant answered that question on the basis that the receiver, in reliance on his powers under, inter alia, the deed of mortgage and charge dated 22nd June, 2001, intends selling assets of the notice party and queries may arise as to his authority to do so and as to title derived therefrom, because of the mis-statement of the date thereof. It seems to me reasonable, in order to obviate such potential difficulties, to apply to have the mis-statement of the date of the deed of mortgage and charge in the particulars filed in the CRO rectified.
8. Secondly, I am satisfied that it would not be appropriate to impose the same conditions on this application as are applied in the case of an order extending time. When an application is made under s. 106 for an order extending the time for a registration of a charge, the invariable practice is to include a “without prejudice” provision, for example, an express saver for the rights of any other secured creditors acquired during the period between the expiration of the twenty one days within which the particulars should have been delivered to the CRO pursuant to s. 99 of the Act of 1963 and the actual registration of the particulars on foot of the extension of time.
9. On the evidence before the Court, I think it is reasonable to infer that the mis-statement of the date on the Form No. 47 was accidental. I am satisfied that an order should be made under s. 106. That the order will direct the Registrar of Companies to rectify the mis-statement of the date of the instrument creating the charge by substituting 22nd June, 2001 for 3rd July, 2001 in the registered particulars and the certificate of registration.
Valley Ice Cream Ltd., Re
[1998] IEHC 119
Mr. Justice McCracken
“7. There is one further factual matter which is relied upon by the Liquidator, namely that the form 47 filed in the Companies Office pursuant to section 99 of the Companies Act, 1963 includes among the particulars of the property charged:-
“An irrevocable undertaking to execute, procure the execution of a mortgage over the equipment in the form attached in the first schedule to the debenture forthwith upon expiration or earlier termination of each lease to which the equipment is subject (as hereinafter defined).”
8. The reference to the mortgage being in the form in the first schedule to the debenture is clearly wrong, as the draft mortgage is contained in the fifth schedule to the debenture. It is suggested that this is misleading, as any creditor looking at the file in the Companies Office would not realise or understand the form of the mortgage to be executed. In my view, this is not relevant, as what is registered is the fact that there is an irrevocable undertaking to procure the execution of a mortgage over the equipment, and the equipment is clearly set out in the form 47. What section 99 requires to be registered is particulars of the charge, not the form which the charge is to take. In my view, it is quite clear from what was registered that there was a charge in the form of an irrevocable undertaking to execute a mortgage over this equipment, and that satisfies section 99.
9. Clause 5.4 clearly creates a legal and binding obligation on the Company to execute a mortgage as soon as any lease of equipment expires or terminates. It does not, and cannot, of itself create a legal mortgage over the equipment, as the equipment is not an asset of the Company at the time of the execution of the debenture. However, at the moment that the lease of any one piece of equipment terminates or expires, there is no doubt that Master Foods would be entitled to obtain an immediate order of specific performance to enforce the execution of a legal charge or mortgage. Furthermore, the form of the charge as set out in the fifth schedule to the debenture quite clearly is intended to create a fixed charge over the goods, as it specifically assigns the goods and the benefit of any insurance thereon. I think it is beyond doubt that the clear intention of this document is that there will be a fixed charge on the specific goods as soon as the document is executed. The only question, therefore, is whether an irrevocable agreement to grant such a fixed charge does of itself create an equitable fixed charge.
10. In my view, the law on this is quite clear. I can do no better than to quote from Fisher & Lightwoods Law of Mortgages (10th Edition) at page 12 where, under the heading ” Equitable Mortgages “, it is stated:-
“Generally, the essence of any transaction by way of mortgage is that a debtor confers upon his creditor a proprietary interest in property of the debtor, or undertakes in a binding manner to do so, by the realisation or appropriation of which the creditor can procure the discharge of the debtor’s liability to him, and that the proprietary interest is redeemable, or the obligation to create it is defeasible, in the event of the debtor discharging his liability. If there has been no legal transfer of a proprietary interest but merely a binding undertaking to confer such an interest, that obligation, if specifically enforceable, will confer a proprietary interest in the subject matter in equity. An equitable mortgage is a contract which operates as a security and is enforceable under the equitable jurisdiction of the court. The court carries it into effect either by giving the creditor immediately the appropriate remedies, or by compelling the debtor to execute a security in accordance with the contract. It is applicable to all property of which a legal mortgage can be made, even where statute provides, as, for example, in the case of ships, a particular method for passing the legal property therein.”
11. The first part of this statement of the law is taken verbatim from the judgment of Buckley J. in Swiss Bank Corporation -v- Lloyds Bank Limited [1980] 2 All E.R. 419 at page 426.
12. In the present case, there has not been a legal transfer of a proprietary interest, but there has been a binding undertaking to confer such an interest, which undertaking is specifically enforceable. I think it is entirely in keeping with the principles governing the creation of a fixed charge that such a charge should be created under these circumstances. The essence of a fixed charge is that property is irrevocably set aside in such a way that the creditor can have recourse to it to satisfy his debt. The clear intention of clause 5.4 was that, as each of the items came into the ownership of the Company, it would immediately be subject to a legal charge in favour of Master Foods, which was to be implemented by the execution of a deed. It is a well known maxim of equity, which is frequently enforced, that equity regards as being done that which ought to be done, and it is for this reason that the undertaking contained in clause 5.4 would be specifically enforceable. It must also be a consequence of the truth of this maxim that, while a legal charge may not have been created, equity will regard a charge as having been created because it ought to have been created under the terms of clause 5.4. That charge must be a fixed charge, as what clause 5.4 contemplates clearly as a fixed charge. Accordingly, I will grant a declaration that the debenture creates a fixed charge in equity over the leased assets to which it refers.”
Byrne v. Allied Irish Banks
[1978] I.R.449
McWilliam J.
“The relevant paragraphs of the letter of the 8th April, 1974, from Wm. Fry & Sons on which the claim of Allied Irish Banks Ltd. is based, are as follows:
“We now therefore undertake in consideration of your granting the company a bridging loan of £4,000 on the strength of the contract for the sale of their premises in Grafton Street to hold such documents of title to the said premises as we may have in trust for the Bank and to hand over sufficient monies out of the proceeds of the sale to redeem this bridging finance as soon as the sale is closed. It is however to be strictly understood that this firm undertakes only to hand over out of the proceeds of sale and should there be any delay in closing the sale the firm cannot be held responsible for the money until the sale has been finalised.”
Having decided that this letter was sufficient to create an equitable charge, I had this matter re-entered for argument on the question of what property was charged and, if it was the purchase money which was charged, whether it was a charge that was required to be registered under s. 99 of the Companies Act, 1963, either as a charge on land or any interest therein or as a charge on book debts of the company.
Since the hearing I have been furnished with the judgment of Mr. Justice Kenny of 1st June, 1976, in Tempany v. Hynes 4 in which he discusses at length the nature of the interest retained in land by a vendor after a contract for sale has been signed, and the extent to which this can be charged so as to affect a purchaser. In the present case I am only concerned to ascertain whether the purchase price was charged. Mr. Justice Kenny’s judgment is only relevant in so far as I suggested originally (and counsel for the bank argued) that the company retained no interest in the lands after the contract for sale which could be charged.
I am satisfied that it was intended to charge the purchase money, that the letter was effective to do this, and that the purchase price is not a book debt within the meaning of the section. Accordingly, I will make the necessary declaration in favour of the bank.
The remaining issue is a question of company law. The company contends that the unpaid vendor’s lien is void against the liquidator because it is a security given by the company which was not registered in accordance with s. 99 of the Companies Act, 1963. That section is practically identical with the corresponding English provision in s. 95 of the Companies Act, 1948, which was considered by Brightman J. in London Cheshire Co. v. Laplagrene Co. 3 Brightman J. held that an unpaid vendor’s lien was the creature of the law; that it did not depend on contract but on the fact that the vendor had a right to a specific performance of his contract and that, accordingly, it was not registrable under s. 95 of the Act of 1948. The learned judge pointed out that the provision in question had been in force since the Companies Act, 1908, but no one had suggested that it was the practice for a vendor to register an unpaid vendor’s lien when selling to a company. The lien is created on the formation of the contract of sale and the time for registration would expire 21 days thereafter. The lien is not discharged until the purchase money is paid on completion. If registration were necessary, every vendor selling to a company would be put to the inconvenience of having to register the unpaid vendor’s lien as a matter of course on the off chance that circumstances might arise which would render it necessary for the vendor to rely on the unpaid vendor’s lien. For the reasons given by Brightman J. I am satisfied that s. 99 of the Companies Act, 1963, does not require registration of an unpaid vendor’s lien arising on the purchase of property by a company. “
Unitherm Heating Systems Ltd -v- Wallace
[2015] IECA 191
Court of Appeal Irvine J.
“Discussion
37. It is beyond doubt that the leading authority on proceeds of sale clauses at the time of the High Court judgment was that of Murphy J. in Carroll, a case in which the Court concluded that the relevant proceeds of sale clause did not create a fiduciary relationship between the buyer and seller but rather confined the seller to a charge over the funds received in respect of the resale of its goods, which required registration.
38. In reaching a contrary conclusion in the present case, the High Court judge distinguished not only the contractual provisions in both cases but also the manner in which the respective parties had conducted their business and, on that basis, found that the relationship of principal and agent existed.
39. For the purposes of considering the distinction drawn by the High Court judge between the two cases, I will briefly summarise the facts in Carroll.
40. In Carroll, the plaintiff, a well-known tobacco company, had supplied goods to the defendants (“Bourkes”) as retailers. Those companies had gone into liquidation. The contract between the parties contained a reservation of title clause which provided that no property in the goods would pass until all sums due to the plaintiff had been discharged. It also gave the defendants the right to resell the goods to a third party on their own account, but not as agents for the plaintiff. Further, the contract included a proceeds of sale clause which required the defendants to “hold all monies received from such sale or other disposition in trust for the company (“Carrolls”) and undertake to maintain an independent account of all sums so received and on request [to] provide all details of such sums and accounts”. No such account was ever established, a fact that the High Court judge concluded was probably known to Carrolls.
41. In the course of the liquidation an issue arose as to the plaintiff’s rights in respect of the proceeds of sale of the goods sold on by the defendants to third parties. The plaintiff argued that these were impressed with a trust in its favour, thus entitling it as a beneficiary standing in a fiduciary relationship with the defendants to trace such proceeds into any other property acquired therewith by the trustees.
42. Murphy J. set out the basic legal principles as follow ([1990] 1 IR 481, 483):-
“The issue in the present case relates to the right of Carrolls in respect of the proceeds of sale of the goods supplied by it. In this context too the basic legal principles are well established. Where a trustee or other person in a fiduciary position disposes of property the proceeds of sale are impressed with a trust which entitles the beneficiary or other person standing in the fiduciary relationship to trace such proceeds into any other property acquired therewith by the trustee … Whether fiduciary obligations are imposed on one party or another depends in part upon the character in which they contract and partly on the nature of the dealings in which they engage. Obviously one would be slow to infer that a vendor and purchaser engaged in an arms length commercial transaction undertook obligations of a fiduciary nature one to the other. On the other hand if one postulates that in any context one person is selling the goods of another the assumption of fiduciary obligations in relation to the sale and in particular the proceeds thereof might well be appropriate. It seems to me that the question must be asked: how does a party come to sell property of which he is not the owner? Is he selling as a trustee in pursuance of a power of sale? Is he selling as the agent of the true owner? Does the sale constitute a wrongful conversion? If any of those questions were answered in the affirmative it seems to me that the law would impose a trust on the proceeds of sale which would confer on the true owner the right to recover those proceeds from the actual seller or, if the proceeds were no longer in the seller’s hands, to trace them into any other property acquired with them.”
43. Murphy J. concluded that it was clear from the terms of the contract that it was envisaged that the defendants would sell on the goods on their own account and not as an agent for Carrolls. Accordingly, he could see no basis upon which to find a fiduciary duty. If such an obligation was to be found, it had to be established by reference to the actual bargain or in the conditions of sale. He was satisfied that the parties intended that the property would pass to the sub-purchaser who would become the full owner.
44. In coming to that conclusion, Murphy J. considered the following facts to be material. Firstly, the contract anticipated that, on the onward sale, the sub-purchaser would become full owner. Secondly, the clause specifically provided that Bourkes were not selling on as an agent of Carrolls, and this being so, they could not be considered a fiduciary. Thirdly, Bourkes could set their own price for the onward sale of the goods. This meant that, following their sub-sale, they were not necessarily going to be replaced by assets of equal value. Fourthly, while Bourkes were contractually obliged to place the monies received in respect of the onward sale of the goods into a separate account, no such account had been established, a fact which Murphy J. inferred was known to Carrolls. Fifthly, the contract provided for a four week credit period, a facility the purpose of which Murphy J. stated was uncertain if Bourkes were not free to use the proceeds during that period. Murphy J. analysed how that arrangement “properly implemented” would work given that the sums of money credited thereto, assuming that the goods were resold at a marked-up price, would be in excess of the amounts due by Bourkes to Carrolls. That being so, Carrolls, if entitled to have recourse to that account for the purposes of discharging monies due to them, would not be entitled to the entire fund which suggested to Murphy J. that the rights of the seller bore all of the characteristics of a mortgage or charge. The charge so created required registration under s. 99 of the Companies Act 1963 and in the absence of such registration was invalid.
45. In the course of his judgment, Murphy J. stressed the importance of looking beyond the contractual terms themselves and warned that the attachment of labels to the dealings of the parties was not determinative of their legal status. The rights of the parties and the nature of the transaction which they were engaged in had to be determined by reference to a consideration of the document as a whole as well as the obligations and rights which it imposed on the parties. Murphy J. expressed himself satisfied that the true nature of the relationship between the Carrolls and Bourkes was one of debtor/creditor and the fact that the proceeds of sale were dealt with by Bourkes in the ordinary course of their business supported that conclusion.
Decision
48. As was stated by Mummery J. in Compaq Computer Ltd v. Abercorn Group Ltd. [1993] B.C.L.C. 602, the seller’s aim in insisting on a retention of title clause or a proceeds of sale clause is to prevent the goods and the proceeds of sale of its goods from becoming part of the assets of an insolvent buyer, available to satisfy the claims of the general body of creditors.
49. However, as was made clear by Murphy J. in Carroll, it does not follow that, just because the seller has such an objective in mind, the protection which it seeks will be achieved. The court must consider the character in which the parties contracted and the nature of the dealings in which they engaged, apart from the contractual provisions themselves, in order to ascertain how the position of the seller was secured. It must also ensure that the substance of the scheme of registration prescribed by s. 99 of the 1963 Act is preserved and that this scheme is not circumvented or manipulated by artificial characterisations of the buyer/seller relationship.
50. What is not in dispute is that Unitherm, as the unpaid seller, must establish a fiduciary relationship between itself and BHT affecting the proceeds of sale by BHT of the goods in question in order to enjoy an equitable right to trace the monies received in respect of the onward sale into a mixed fund.
73. In general, most recent authorities have tended to treat “proceeds of sale” clauses as giving rise to charges which require registration and the courts have been reluctant to infer the existence of a fiduciary relationship between parties who, as Murphy J. described in Carroll, appear to be engaged in arms length commercial transactions as vendors and purchasers.
74. Counsel for Unitherm challenged the liquidator’s arguments that BHT had granted Unitherm a charge over the money it received from the sub-sale by reference to the decisions in Hickey, Romalpa and Armour and another v. Thyssen Edelstahlwerke A.G. [1991] B.C.L.C. 28 (“Armour”). I will deal with each of these in turn as I do not believe they provide adequate support sufficient to defeat the liquidator’s submissions.
94. McCann and Courtney, Companies Acts 1963-2009, (Dublin, 2010) in dealing with proceeds of sale clauses in the context of s.99 of the Companies Act 1963 provide the following helpful commentary:
“Proceeds of sale clause: In some cases it has been held that a clause which purports to retain the proceeds of a sub-sale of goods until the purchase price has been paid, will not be regarded as a registerable charge provided that it satisfies all or some of the following criteria:
(a) it expressly creates a fiduciary relationship between the seller and the buyer;
(b) it stipulates that in any sub-sale the buyer is to be regarded as acting for and on behalf of the seller;
(c) it imposes a duty on the buyer to keep the proceeds of any sub-sale separate from the buyer’s other moneys; and
(d) it requires the buyer to account for such proceeds to the seller.”
95. Most recent decisions, as is stated by the aforementioned authors, have leaned against the view that a clause in the above terms is successful in retaining title such as to entitle the seller to trace monies received by the purchaser following the resale of the goods. The greatest indicator in favour of title passing to the purchaser, regardless of the existence of a retention of title clause, is an agreement between the parties that the purchaser may sell on the goods in the course of its own business, an undisputed right of BHT in the present proceedings. If, on the one hand, Unitherm had retained full legal and beneficial title to the goods, the Court could not find that BHT had created a charge on the goods in favour of Unitherm as it is not legally possible for the buyer to charge in favour of the seller a title or interest which the buyer has not got. On the other hand, if on the true construction of the agreement the legal title to the goods has passed from the seller to the buyer, the Court may conclude that the legal consequences of the agreement is that the position of the seller is in fact secured by a charge created in his favour over the goods by the buyer.
99. A clause similar to that in the present case was considered by Mummery J. in Compaq Computer Ltd v. Abercorn Group Ltd [1993] B.C.L.C. 602. There, the seller required the buyer to account for the full proceeds of the resale of its goods. The Court took the view that the seller was not entitled to retain out of the proceeds more than what was sufficient to discharge the unpaid price of the goods. The seller’s right accordingly amounted to a limited interest in the proceeds by way of security.
105. The question I have to ask myself is whether the parties agreed that BHT would be trustee of the proceeds of sale. In that regard, in order for the seller to be entitled to the type of proprietary interest in the proceeds of sale as is contended for by Unitherm, the legal title to the proceeds of sale must vest in the buyer while their beneficial ownership vests in the seller. However, if the buyer is expressly or impliedly empowered to use the proceeds of sale as its own money, then it will not be considered to be a trustee of the proceeds but will be deemed to be in a normal creditor-debtor relationship with the seller.
Conclusions
109. In conclusion, clause 11 of Unitherm’s standard conditions of sale, that being the foundation stone upon which its claim is based, was clearly designed with the objective of securing its interests, so far as was possible, against the risk of non-payment after it had parted possession with its goods to any of its customers such as BHT.
110. It is accepted that the retention of title clause in the conditions of sale operated between Unithermand BHT as intended in relation to the supply contract. It is clear from those conditions and from the manner in which the parties traded that while Unitherm’s goods remained in BHT’s possession and payment therefore remained outstanding, title did not pass and was not intended to pass, hence the payment of €13,853.49 to Unitherm in respect of goods which fell into that category in the course of the liquidation.
111. As to the proceeds of sale clause and the relationship between the parties when BHT sold Unitherm’s goods to its customers, I am satisfied that the relationship at that stage was always intended to be one of creditor and debtor. The parties did not intend that BHT would act as fiduciary on behalf of Unithermeither as its agent or as bailee in possession of its goods with a power of sale.
112. As to agency, in my view, the High Court judge was wrong in concluding that the evidence supported a finding that the parties had entered into such a relationship. Such a relationship is not evidenced in the standard conditions of sale, the documentation concerning the supply contract, or the contracts for the resale of the goods, or by the conduct of the parties themselves.
113. As to a fiduciary relationship built upon a relationship of bailment, a relationship not considered by the High Court judge, I can find no evidence to support a conclusion that the parties intended that BHT would sell Unitherm’s goods as bailee in possession. Again, this relationship is not to be found in the terms and conditions of sale, the contractual provisions, the trading documentation, or the manner in which the parties conducted their business.
114. Against such a finding are:-
(i) BHT’s right to sell to it’s customers in the course of its own business;
(ii) credit terms of 60 days;
(iii) the standard conditions of sale which sought to impress the entirety of the purchase monies received, including BHT’s profit margin, with a trust, the latter being monies to which it had no legal or beneficial entitlement;
(iv) the fact that no separate account was ever created for the purchase monies; and
(v) the “all sums due” nature of the retention of title clause.
All of these are characteristics of a charge made in favour of the seller over a fund to which it might have recourse for the discharge of any monies outstanding.
115. Regardless of some differences in the underlying facts between the two cases, I am satisfied that the transaction whereby BHT sold Unitherm’s products to its customers was in substance the same as that with which the Court was concerned in Carroll. In this regard, I differ with respect from the conclusion reached by Peart J. in the High Court. That being so, I am satisfied that in substitution for the right of property which Unitherm had enjoyed in its goods until the point in time when BHT proceeded to resell them, BHT granted to Unitherm a charge in its favour over the proceeds of sale of those goods. That charge was one which required registration under s. 99 of the Companies Act 1963, and in the absence of such registration is invalid and void as against the liquidator.
116. Accordingly, for my part, I would allow the appeal.
Investment Options and Solutions Ltd -v- Companies Acts
[2010] IEHC 107
Laffoy J.
“6. There is a useful résumé of the effect of that provision in MacCann and Courtney on Companies Acts 1963-2006 2008 Ed. at p. 225, in which it is stated:
“An error in the particulars delivered to the Registrar will not affect the validity of the charge, once a certificate of registration has been issued pursuant to [the Act of 1963], s. 104. Courtney [The Law of Private Companies … para. 21.090] argues therefore that an application for rectification may be superfluous, particularly if the court were to impose the same conditions as are applied in the case of an order extending time. In any event, the jurisdiction conferred on the court by s. 106 only allows it to correct an omission or mis-statement in the delivered particulars and does not allow for the deletion of an entire entry. Furthermore, the court’s jurisdiction is confined to rectifying errors in the particulars which are required by law to be delivered to the registrar of companies: there is no jurisdiction to order the rectification of factual errors in particulars the delivery of which is not required by law.”
A number of points arise out of that résumé which require to be commented on in the context of this application.
7. First, s. 104 of the Act of 1963, which deals with the certificate of registration, provides:
“The registrar shall give a certificate under his hand of the registration of any charge registered in pursuance of this Part, stating the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with.”
The conclusiveness of the certificate of registration relates to compliance with the statutory registration requirements. There is a wealth of authority for the proposition that, because of the conclusiveness of the certificate, the registration of the charge cannot be challenged even when the registration requirements have not in fact been observed. On this application, counsel for the applicant relied on three Irish authorities: Lombard and Ulster Banking (Ireland) Ltd. v. Amurec Ltd. [1976-77) I.L.R.M. 222; Re Shannonside Holdings Ltd. (Unreported, High Court, Costello J., 20th May, 1993,) and Re Valley Ice-Cream (Ireland) Ltd. [1998] IEHC 119. Having regard to the effect of s. 104, a question arises as to whether this application is superfluous. Counsel for the applicant answered that question on the basis that the receiver, in reliance on his powers under, inter alia, the deed of mortgage and charge dated 22nd June, 2001, intends selling assets of the notice party and queries may arise as to his authority to do so and as to title derived therefrom, because of the mis-statement of the date thereof. It seems to me reasonable, in order to obviate such potential difficulties, to apply to have the mis-statement of the date of the deed of mortgage and charge in the particulars filed in the CRO rectified.
8. Secondly, I am satisfied that it would not be appropriate to impose the same conditions on this application as are applied in the case of an order extending time. When an application is made under s. 106 for an order extending the time for a registration of a charge, the invariable practice is to include a “without prejudice” provision, for example, an express saver for the rights of any other secured creditors acquired during the period between the expiration of the twenty one days within which the particulars should have been delivered to the CRO pursuant to s. 99 of the Act of 1963 and the actual registration of the particulars on foot of the extension of time. In this case, the CRO search against the company exhibited discloses three charges against the notice party: the deed of mortgage and charge the date on which is incorrectly given as 3rd July, 2001; the mortgage and debenture dated 28th May, 2003 in favour of the applicant, on foot of which the receiver was appointed; and a judgment mortgage registered on 28th September, 2009 by Andrew McNabb. The applicant has put both the notice party and Mr. McNabb on notice of this application and there is proof of service of the notice of motion before the Court. Further, correspondence between Mr. McNabb’s solicitors and the applicant’s solicitors has been exhibited. However, there was no appearance on behalf of Mr. McNabb at the hearing of the application on 15th March, 2010. Nonetheless, I have noted what was stated in the correspondence from Mr. McNabb’s solicitors. Having said that, I am satisfied that, on the facts of this case, it would not be appropriate to include the usual condition which is imposed when an extension of time is granted under s. 106. The position here is that the charge was created on 22nd June, 2001. The Form No. 47 was received in the CRO on the 6th July, 2007, albeit with a mis-statement of the date of creation of the charge. However, the Form No. 47 was received within twenty one days after the date of the creation of the charge, as required by s. 99. Aside from the conclusiveness of the certificate of registration under s. 104, I am satisfied that s. 99(1), which provides that failure to deliver the prescribed particulars within twenty one days after creation of a charge “shall, so far as any security on the company’s property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company” could not be applied in this case so as to render the deed of mortgage and charge dated 22nd June, 2001 void as against Mr. McNabb.
9. On the evidence before the Court, I think it is reasonable to infer that the mis-statement of the date on the Form No. 47 was accidental. I am satisfied that an order should be made under s. 106. That the order will direct the Registrar of Companies to rectify the mis-statement of the date of the instrument creating the charge by substituting 22nd June, 2001 for 3rd July, 2001 in the registered particulars and the certificate of registration.
Frank Bell & Sons Ltd -v- Shaw & ors
[2015] IEHC 108
White Michael J.
“Jurisdiction to Permit Late Registration.
Section 106(1) of the Companies Act 1963 provides that:- The court, on being satisfied that the omission to register a charge within the time required by this Act or that the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction was accidental, or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested, and on such terms and conditions as seem to the court just and expedient, order that the time for registration shall be extended, or, as the case may be, that the omission or mis-statement shall be rectified.
“
11. The relief is discretionary on the court being satisfied:-
• That the omission was accidental or due to inadvertence or to some other sufficient case.
• It will not prejudice the position of creditors or shareholders of the Company or
• That it is otherwise just and equitable to grant relief.
12. The Applicants have submitted that the court if it extends time should direct the Registrar of Companies to register the charge in priority to the charge registered in the Companies Office on the 9th September, 2013 by Frank Bell, the director of the Company.
13. Section 99 (1) provides that any charge created by the Company shall insofar as any security on the Company’s property undertaking is conferred thereby could be void against the Liquidator and any Creditor of the Company….. “unless the prescribed particulars are registered within 21 days after the date of its creation.
14. Courtney the Law of Companies 3rd Edition 2012 at 19.08 states:-
“A registerable charge that is not registered will be void against a subsequent creditor even where that creditor is aware of the prior charge. Authority for this is again in a case of Re Monolithic Building Co where the subsequent encumbrancer, who registered his charge notwithstanding his knowledge of the existence of a prior unregistered mortgage, was held by the Court of Appeal, to have priority. His knowledge of the prior charge did not preclude him from insisting on his rights as a registered debenture holder. ”
15. In Re Monolithic Building Company [1915] 1 Ch. 643, the Court of Appeal confirmed that a subsequent chargeholder (who was also director) with notice of the prior unregistered charge was nevertheless entitled to take advantage of legal rights which flowed from the statutory provision, and the unregistered charge remained void against him. Phillmore L.J. described the consequences of non registration in the following terms:- at p667
“It makes void a security; not the debt, not the cause of action, but the security, and not as against everybody, but not as against the company grantor, but against the liquidator, and against any creditor, and it leaves the security to stand as against the company while it is a going concern. It does not make the security binding on the liquidator as successor of the company.”
16. If the court accedes to the application to admit the charge to be registered out of time, the issue arises as to the priority of the charge.
17. Courtney the Law of Companies 3rd Edition 2012 at 19.094 states:-
“It is usual for the court to insist the late registration is to be without prejudice to rights acquired by others”.
This principle is commonly referred to as the Joplin proviso from the early 20th century English case Re Joplin Brewery Co [1902] 1 Ch. 79.
Conclusion
24. The Applicants made serious errors over a number of years in failing to register the Bank of Scotland (Ireland) Limited charge on the Folio and failure to address the issue of notifying the Companies Office of the charge.
25. However the facility letter of the 22nd June, 2006 sets out at Paragraph 3 (i) “an extension of Bank of Scotland (Ireland) Limited’s first specific Charge over the freehold land and premises of the Borrower consisting of an industrial unit at No. 12 Mullingar Business Park, Mullingar, Co. Westmeath”. That facility letter was signed by Frank Bell on the 26th June, 2006. The Company’s opposition to the extension of time to register the charge is thus unreasonable.
26. The Applicants have not established mala fides against Frank Bell. He took financial advice in early 2012 about his loans to the Company and sought legal and Counsel’s advice. He could well have been confused as to what security was held against Unit 12 Industrial Estate, Mullingar, even though he had signed the facility letter of the 22nd June, 2006.
27. It is appropriate to extend the time to register the charge in the Companies Office without prejudice to the rights of Frank Bell. The charge should have priority in the Companies Office from the date of the application to this Court, the 13th February, 2014. It is appropriate that time be extended for a period of 21 days from the date of perfection of the order to allow the charge to be registered in the Companies Office.
Eisc Teoranta, In re
[1991] ILRM 760
McCRACKEN J
“Where either a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge, or possession is taken by or on behalf of those debenture holders of any property comprised in or subject to the charge, then, if the company is not at the time in course of being wound up, the debts which in every winding up are, under the provisions of Part VI relating to preferential payments to be paid in priority to all other debts, shall be paid out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal or interest in respect of the debentures.
This section was considered by Lardner J in In re Eisc Teoranta [1991] ILRM 760 in circumstances where a receiver was appointed under a fixed and floating charge, discharged all sums due under the debenture out of the proceeds of sale of the assets subject to the fixed charge and was left in possession of the proceeds of sale of the assets subject to the floating charge. Subsequently an order was made winding up the company and a liquidator was appointed and the issue was whether the receiver was bound to discharge the preferential creditors out of the proceeds of sale of the floating charge before handing them over to the liquidator. Lardner J analysed the section at p. 763 as follows:
Despite the forceful submissions advanced by Ms Finlay, I think s. 98 is sufficiently clear and mandatory to enable a determination of this issue to be made. The section applies first where ‘a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge’ which is this case. Then it imposes a clear duty on the receiver in these words ‘the debts which in every winding up are under the provisions of Part VI of this Act relating to preferential payments to be paid in priority to all other debts shall be paid out of any assets coming into the hands of the receiver … in priority to any claim for principal or interest in respect of the debentures.’ In my view the section specifies when this duty arises, namely, where a receiver is appointed on behalf of the holders of any debenture of a company secured by a floating charge. Then, if the company is not at the time, that is the time of the appointment, in the course of being wound up the duty is imposed on the receiver to make the preferential payments. It is noteworthy that the duty is to make these payments in priority to any claim for principal or interest in respect of the debentures. In my view such a claim is the basis of the appointment of the receiver. It is a claim which exists at the time of his appointment.
Accordingly, he held that the receiver was bound to discharge the preferential creditors. In the present case, counsel for the First National Building Society sought to make the distinction that this case had involved a liquidator, rather than a mortgagee, but I must say I fail to see how the distinction affects the construction of the section. The present case is similar to the Eisc Teoranta case in that the receiver in fact discharged the debenture holder’s debt out of the fixed assets, but he did take possession of the assets which were subject to the floating charge. It was sought to be argued that the priority referred to in s. 98 was only in respect of the debts due under the debentures, and as no part of the assets subject to the floating charge were used to discharge any monies due under the debentures, the section never came into effect. This is dealt with in the judgment of Lardner J where he holds, in effect, that once a claim has been made under the debenture, the obligation arises under s. 98 . I cannot see any practical distinction between the two cases, and I can see no good reason to differ from that judgment.
The only remaining point is whether the proviso in the order of Keane J extending time under s. 106 gives priority to the preferential creditors. If the judgment of Lardner J in the Eisc Teoranta case is correct, then the liability to discharge the preferential creditors arose on the appointment of the receiver, and was an existing liability of the company with a preferential status at the time of the order extending time. It was sought to be argued that, while they may have been preferential creditors, they were simply ordinary creditors who were given some form of preferential treatment, but I do not think I can accept that argument. On the appointment of the receiver, the preferential creditors were given a priority under s. 98 , and that priority was a right acquired prior to the time of the registration of the particulars of the mortgage of the First National Building Society.
Accordingly I would direct:
(a) That the receiver is bound to discharge the preferential creditors of the company out of the proceeds of sale referable to the sale of the property at Bagenalstown, Co. Carlow, and
(b) that the proposed payment by the receiver takes priority over any rights of the First National Building Society arising under the mortgage which was registered in its favour on 15 October 1993.”