But a floating security, created by debentures, will not be rendered specific by mere default on the part of the company in payment of principal or interest or other default under the debentures, or the covering trust deed, in the absence of express stipulation, until the debenture holders take some steps to enforce their security, and to prevent the company from continuing to carry on its business (x): A person who purchased land from a company which had issued debentures expressed to operate as a floating security until default in payment of principal and interest, was held to be entitled to reasonable evidence that there had been no default in payment of principal or interest of the debentures (y). Chap. XXVII. § 3 (ii). Where debentures by way of floating security fix a time for Effect of payment of the principal moneys secured, the winding up of the winding up. company before that time renders the money immediately payable, and entitles the debenture holders at once to realize their security for the full amount of principal, interest, and costs (≈). Inasmuch as debentures which are given by way of floating Company security do not become specific until the appointment of a may deal with its property receiver, or on the company being wound up, it may in the after issuing debentures by meantime so long as the company is a going concern, notwithstanding the debentures, deal with its property in the ing security. ordinary course of its business (a). Accordingly, a company may, after issuing such debentures, give a mortgage of a specific asset to secure an advance necessary for carrying on its business, which will rank in priority over the debentures (6), even though the debentures are expressed to be a first charge on the undertaking and present and future property of the company (c). In some cases the debenture itself expressly prohibits the company from creating charges on its property in priority to the debentures. But such a provision does not prevent a person without notice from acquiring a charge upon specific property in priority to the debentures (d), nor a solicitor of the company (x) Government Stock Investment, &c. Co. v. Manila Rail. Co., (1897) A. C. 81. (y) Re Horne and Hellard, 29 Ch. D. 736. (z) Wallace v. Universal Automatic Co., (1894) 2 Ch. 547, C. A. (a) Supra, p. 512. (b) Moor v. Anglo-Italian Bank, 10 Ch. D. 681, C. A.; Re Hamilton's Windsor Ironworks Co., Exp. Pitman, VOL. I.-C. 12 Ch. D. 707; Ward v. Royal Ex- (c) Wheatley v. Silkstone Coal Co., 29 (d) Re Castell and Brown, (1898) 1 Ch. 315; Re Valletort Sanitary Laundry Co., (1903) 2 Ch. 654. LL way of float Chap. XXVII. § 3 (ii). from acquiring a lien having priority over the floating charge (e). So also a distress levied before a floating security has become specific will prevail over the holders of the debentures (ƒ). Debentures, which are originally, or which have become charges upon the specific property of the company, are prior to all subsequent incumbrances, judgments, and general creditors, so far as relates to the property specifically charged by the debentures (g). And this is so where the debentures are only agreed to be issued and not actually issued (h), and also where debentures are issued without authority if the holders had no notice of the irregularity (i). As between execution creditor of the company and debenture holders by way of floating charge the former takes subject to the equity of the latter, and the rights of the debenture holder prevail (k), at any rate until the sheriff has sold (1), and also notwithstanding sale if before sale a receiver has been appointed (m). Where debentures are charged on the property of a company land of com- including land, though by way of floating security, a contract for sale of such debentures is a contract for an interest in land within sect. 4 of the Statute of Frauds (n). Charge of pany. Charge of chattels. Afteracquired stock in trade. A debenture which comprised the chattels of the company must have been registered under the former Bills of Sale Acts, as against execution creditors; but registration was not necessary against a liquidator under a winding up (0); nor is it under the Bills of Sale Act of 1882 (p). A trust deed charging the assets of a company to cover debentures, if duly registered under the Companies Act, 1862 (q), is not a bill of sale within sect. 14 of the Bills of Sale Act, 1882 (r). It was held in an Irish case that a mortgage of the present and future stock in trade, plant, property and effects of a com (e) Brunton v. Electrical Engineering Corp., (1892) 1 Ch. 434. (f) Re Roundwood Coll. Co., Lee v. Roundwood Coll. Co., (1897) 1 Ch. 373, C. A. (g) Ames v. Birkenhead Docks Trus- (h) Simultaneous Colour Printing Syn. (k) Davey v. Williamson, (1898) 2 Q. B. 194. (1) Re Standard Manufacturing Co., (1891) 1 Ch. 627; Re Opera, Lim., (1891) 3 Ch. 260, C. A. (m) Taunton v. Sheriff of Warwickshire, (1895) 1 Ch. 734; 2 Ch. 319. (n) 29 Car. II. c. 3. See Driver v. Broad, (1893) 1 Q. B. 744, C. A. (0) Re Marine Mansions Co., L. R. 4 Eq. 601. (p) See ante, p. 219. (9) See infra, pp. 519, 520. (r) Richards v. Kidderminster (Overseers of), (1896) 2 Ch. 212. pany, will create a valid charge as against the general creditors. on all after-acquired stock in trade and property (s); but this question may perhaps be regarded as still open to doubt (t). Chap. XXVII. § 3 (ii). Custody of A mortgage of the whole of the property of a company does not give the right of custody of the company's books and docu- books, &c. ments to the receiver of the debenture holders as against the liquidator, except as regards such documents as are necessary to support the debenture holders' title (u). iii.-Future Calls.-Mortgages of future calls are expressly Mortgage of provided for in the statutory form of mortgage appended to the future calls. Companies Clauses Consolidation Act, 1845 (x), for the use of companies constituted under special Acts. But every mortgage or charge on uncalled capital created on or after 1st January, 1901, must be registered under the Companies Act, 1900 (y). The remedy of foreclosure is applicable to the uncalled capital Foreclosure. of a joint stock company (≈). power to A mortgage or debenture given by a joint stock company Memorandum cannot effectually charge the proceeds of a future call, unless must give the memorandum gives power to charge them either expressly charge future or by implication from the terms of the power (a). But there calls. is nothing in the Companies Act, 1862 (b), or in any of the amending Acts, which prohibits a company from mortgaging its future or unpaid capital; and accordingly, if the memorandum expressly or impliedly gives power to mortgage such capital, and if neither the articles of association nor any resolution imposes any restriction on the exercise of such power, a mortgage of such capital is valid so as to give priority over creditors in a winding up (c). Thus, where the memorandum of association of a company specified one of the objects of the company as being "to receive money, or loans, on deposit or (s) Exp. Cox, Re Dublin Drapery Co., 13 L. R. Ir. 174; post, p. 516. (t) See Florence Land, &c. Co., 10 Ch. D. 530, C. A. As to future calls, see post, p. 516. (u) Engel v. South Metropolitan Brewing, &c. Co. (No. 2), (1892) 1 Ch. 442. (x) And see Wickham v. New Brunswick Rail. Co., L. R. 1 P. C. 64. (y) 63 & 64 Vict. c. 48, s. 14; post, p. 520. (z) Sadler v. Worley, (1894) 2 Ch, 170. And see post, Chap. XLIX., Sect. I. (iii). (a) King v. Marshall, 33 Beav. 565; (b) 25 & 26 Vict. c. 89. (c) Re Pyle Works, 44 Ch. D. 534, C. A.; Re Mayfair Property Co., (1898) 2 Ch. 28, C. A. See Howard v. Patent Ivory Manufacturing Co., 38 Ch. D. 156; Re Pyle Works (No. 2), (1891) 1 Ch. 173. Chap. XXVII. otherwise, and upon any security of the company, or upon the security of any property of the company," it was held that these § 3 (iii). words authorized a charge on uncalled capital (d). But a power to mortgage the "property of the company," without more words, will not authorize a mortgage of unpaid capital, a resolution of the directors making a call being a condition precedent to the proprietary right of the company in such capital (e). So future calls will not be included in a mortgage or debenture by the words "estates," or "all real and personal estate" of the company (f), and a power to mortgage "property and funds" does not authorize a mortgage of uncalled capital (g). And a debenture which charges the undertaking of a company and "all the property to which it now is or shall at any time hereafter become entitled, and all the estate, right, title and interest of the company in, to and upon the said premises," does not constitute a charge on the uncalled capital (). A power to mortgage the "assets" of the company will comprise everything which is available to satisfy the liabilities of the company, and, therefore, uncalled capital (). And such a mortgage of future calls has been held to be authorized by a power to charge the "property and rights" of the company (k). Effect of charge of future calls. In a recent case (7), where the memorandum of association contained no reference to borrowing, but the articles authorized the company to borrow upon mortgage of its lands, works, "and other property and effects" for the time being of the company, it was held that the company had power to mortgage its uncalled capital. The result of the decisions seems to be that a charge of afterafter-acquired acquired property or of unpaid calls, if duly authorized and property or made by apt terms, will be valid as against the company as a going concern. It has been doubted, having regard to the provisions of the Judicature Act, 1875, s. 10, whether a charge of after-acquired property would be supported as against creditors (d) Newton v. Anglo-Australian Investment Co., (1895) A. C. 244, J. C. (e) Bank of South Australia v. Abrahams, L. R. 6 P. C. 265. See Hulme v. Drachenfels, &c. Mining Syndicate, 2 Manson, 146. (f) King v. Marshall, 33 Beav. 565. See Re Marine Mansions Co., L. R. 4 Eq. 601. (g) Re Colonial Trusts Corp., Exp. Bradshaw, 15 Ch. D. 465, C. A. (h) Re Russian Spratts' Patent, Lim., (1898) 2 Ch. 149, C. A. (i) Page v. International Agency, &c. Trust, 62 L. J. Ch. 610. (k) Howard v. Patent Ivory Co., 38 Ch. D. 156. (1) Jackson v. Rainford Colliery Co., (1896) 2 Ch. 340. Chap. XXVII. on the winding up of the company (m); but the validity of a charge of future calls has been upheld even as against creditors in winding up (»). Unpaid calls are not, strictly speaking, the § 3 (iii). "property," either present or future, of a company, but they are part of the actual capital and assets of a limited company. It would seem that this rule would not apply to an unlimited or guarantee company, so as to render the liability of its members part of its capital (0). In the absence of an express power to mortgage calls, arrears Arrears of of calls may be mortgaged (p), and calls already made, though calls. not yet payable (q). If a company mortgage a call, and, before it is received, make another call, it cannot prejudice the mortgagees by getting in the second call at the expense of the first (»). The power of directors to make calls ipso facto comes to an end on the winding up of the company (s). Debentures charging the undertaking and property, present and future, of the company, including uncalled capital, will include all capital got in before liquidation, but not calls got in during liquidation (†). SECTION IV. REGISTRATION OF SECURITIES OF COMPANIES. i.-Securities of Railway and other Public Companies.-By Register to be sect. 45 of the Companies Clauses Consolidation Act, 1845 (u) kept. (which, as has been seen, applies to railway companies and other companies constituted under special Acts), a register of mortgages and bonds is required to be kept by the secretary with the particulars therein specified, and to be open to inspection by all persons interested (r). (m) Re Florence Land, &c. Co., 10 Ch. D. 530, C. A. (n) Re Pyle Works, 44 Ch. D. 534, C. A. (0) Per Cotton, L. J., ibid. at p. 574. (p) Re Sankey Brook Coal Co., L. R. 9 Eq. 721; 10 Eq. 381; Gibbs' Case, L. R. 10 Eq. 312. (g) Pickering v. Ilfracombe Rail Co., L. R. 3 C. P. 235. (r) Humber Ironworks Co., 16 W. R. 474, 667. (s) Fowler v. Broad's Patent Night (t) Re Streatham and General Estates (u) 8 & 9 Vict. c. 16. (x) Mutter v. Eastern and Mid. Ry., 38 Ch. D. 92. |