1965 (3) TMI 44 - HC - Companies Law

Court voids charges favoring Richards as fraudulent preferences over other creditors. Registrar's certificate held conclusive despite defects.

The court declared certain charges created by the company in favor of Richards as void on the grounds of fraudulent preference. The charges on the Putson ... Certificate of registration, Winding up – Fraudulent preference 7560. Issues Involved:1. Fraudulent preference of charges.2. Defective registration of charges.Detailed Analysis:Fraudulent Preference of Charges:The liquidator sought declarations that certain charges created by the company in favor of Richards were void on the grounds of fraudulent preference. The liquidator argued that the mortgage on the Putson property and the charges on the Shaw and Shrivenham properties, created after the meeting on May 29, 1961, represented fraudulent preferences and were void against the liquidator.The court referred to section 44 of the Bankruptcy Act, 1914, which defines 'view' as 'intention' and places the burden of proving fraudulent preference on the party seeking to avoid the transaction. The court considered several authorities, including Peat v. Gresham Trust Ltd. [1934] AC 252, and In re M. Kushler Ltd. [1943] Ch. 248, to establish that the debtor's intention is a matter of fact and that the court must draw proper inferences from the evidence.The principle from bankruptcy cases, such as Ex parte Fisher, In re Ash [1872] 7 Ch. App. 636, was applied, indicating that a promise to execute a charge at the creditor's request is a fraudulent arrangement. This principle was reaffirmed in In re Jackson & Bassford Ltd. [1906] 2 Ch. 467, stating that such promises are evidence of an intention to commit fraud upon general creditors.In the present case, the court found that the dominant intention of Bennett and West was to perform the company's promise to Richards, which constituted an intention to prefer Richards over other creditors. This dominant intention made the charges created on May 29, 1961, void against the liquidator since the company went into liquidation within six months of creating the charges. The court noted that the company was unable to pay its debts at all relevant times.However, the court conceded that the claim based on fraudulent preference could not be maintained regarding the charge on the Shaw property for the lb100 paid on May 29 and the lb300 paid to Messrs. Kemp, as there was no fraudulent preference for that lb400.Defective Registration of Charges:The liquidator also alleged that the charges on the Shaw and Shrivenham properties were void due to defective registration. According to Section 95 of the Companies Act, 1948, charges created by a company must be registered within 21 days of their creation. The charges in question were executed on June 5, 1961, but falsely dated June 23 and submitted for registration within 21 days of the latter date, not the former.Mr. Slade argued that the registration was a nullity because the charges were not eligible for registration within the 21-day period. Mr. Bowyer countered by relying on section 98(2), which states that the registrar's certificate is conclusive evidence that the registration requirements have been complied with.The court referred to National Provincial and Union Bank of England v. Charnley [1924] 1 KB 431, which held that the registrar's certificate is conclusive evidence that the requirements for registration have been met, even if the particulars are incorrect. The court found that this principle applied to the present case, where the date of the charge was wrongly stated.The court acknowledged that there might be a lacuna in the Act, as it provides protection even when the particulars are incorrect or fraudulent. The court also considered section 101, which allows for rectification of the register, but noted that this power should not be lightly exercised, especially after liquidation has crystallized the rights of the parties.In conclusion, the court found that the charges created on the three properties were void against the liquidator due to fraudulent preference, except for the lb400 on the Shaw property. The court also found that the defective registration argument could not invalidate the charges due to the conclusive nature of the registrar's certificate under section 98(2).