088.2 the special Act to borrow money on mortgage or bond (which are Chap. XVI. commonly comprehended under the term debenture), it may exercise the power from time to time with the authority of a general meeting to the extent authorized by the special Act.1 The mortgages may comprise "the undertaking" and future Mortgage calls on the shareholders.3 The mortgagees and bond holders taking." respectively have no preference one above another by reason of Mortgage priority of date.1 of "under of calls. A register of the bonds and mortgages is kept, and may be Registration. inspected by any shareholder or mortgagee or bond creditor, or by any person interested in a bond or mortgage.5 Transfers of bonds or mortgages must be made by deed in the Transfers. statutory form, which requires registration to complete the title of the transferee. A transfer "in blank" is not a transfer by deed until the blank has been filled up and the instrument re-delivered by the transferor; and, therefore, the registration of such a transfer which has not been re-delivered is ineffectual. The Act requires that the deed shall be stamped and state the true consideration; it is doubtful whether non-compliance with this provision will render the transfer invalid.9. 8 Interest on the bonds and mortgages is payable in preference to any dividends payable to the shareholders.10 If a period is fixed by the mortgage deed or bond for repayment of the principal, upon the expiration of that period the principal becomes payable on demand; if no time is fixed, the mortgagee or bondholder can, after twelve months from the date of the mortgage or bond, demand payment of the principal and arrears of interest on giving six months' notice, and in the like case the company may at any time pay off the money borrowed on giving six months' notice.11 Ib. ss. 38, 39, 40. Mortgages or bonds issued without the authority of a general meeting are valid in the hands of a purchaser for value without notice; Re Romford Canal Co., 24 Ch. D. 85; Fountaine v. Carmarthen R. Co., 5 Eq. 316. As to the meaning of "undertaking," see 8 & 9 Vict. c. 16, s. 2; Gardner v. L. C. & D. R. Co., 2 Ch. 201. It appears to mean the going concern created by the special Act. 38 & 9 Vict. c. 16, ss. 38, 43, ante, p. 296. 4 Ib. ss. 42, 44. See Landowners' Co. 5 lb. s. 45. See as to enforcing the 7 Powell v. London & Provincial Bank, 9 Powell v. London, &c. Bank, sup. Chap. XVI. Remedies of mortgagee, -receiver. Of bondholder execution. Debenture stock, -under Companies Clauses Acts; Where the special Act empowers the mortgagees to enforce payment of arrears of interest, or of principal and interest, by the appointment of a receiver, two justices may, upon the mortgagees' application, appoint a receiver of the tolls or sums liable to the payment of the interest, or principal and interest.1 A bondholder of the company can enforce his security only by action; and on obtaining judgment he is in the same position as any other judgment creditor of the company, i.e., he can obtain a receiver, and can issue execution against all its property, but not so as to prevent the carrying on of the undertaking of the company; and, in the case of railway companies, a manager may be appointed, but the rolling stock and plant are protected by statute. Although the surplus lands of a railway company may be ordered to be sold on the application of an execution creditor, the lands actually used for the purposes of the railway cannot be sold.4 Where a company, incorporated for the purpose of carrying on any undertaking, is authorized by special Act incorporating Part III. of the Companies Clauses Act, 1863, to issue debenture stock, it may, with the sanction of a special meeting, raise any part of the money, authorized to be raised by mortgage or bond, by the issue of debenture stock instead of mortgages and bonds. By the Railway Companies Act, 1867, this power is extended to railway companies, and, by the Companies Clauses Act, 1869,7 to companies which by Act of Parliament have power to borrow on mortgages or bonds, but not power to issue debenture stock. Debenture stock, with the interest thereon, is a charge on the undertaking of the company prior to all shares or stock of the company, and the interest on it has priority over all dividends or interest on any shares or stock, and ranks next to the interest on mortgages or bonds which have been legally granted before the 1 Ib. ss. 53, 54. See Fripp v. Chard R. Co., 11 Hare, 241, as to the jurisdiction of the Court also to appoint a receiver. 2 As to execution by the appointment of a receiver, see M. L. R. P., p. 385, and post, p. 311. 330 & 31 Vict. c. 127, s. 4, made perpetual by 38 & 39 Vict. c. 31. See Re Mersey R. Co., 37 Ch. D. 610; Re Eastern and Midlands R. Co., 45 Ch. D. 367. As to the meaning of "railway" company, see Re E. & W. Ind. Docks Co., 38 Ch. D. 576; G. N. R. Co. v. Tahourdin, 13 Q. B. D. 320. 4 Gardner v. L. C. & D. R. Co., 2 Ch. 201, 385; Re Bishops Waltham R. Co., 2 Ch. 382; Re Hull & Hornsea R. Co., 2 Eq. 262. 5 26 & 27 Vict. c. 118, ss. 22 et seq. 630 & 31 Vict. c. 127, s. 24; R. Mersey R. Co., [1895] 2 Ch. 287. 7 32 & 33 Vict. c. 48, s. 3. issue of the debenture stock;1 but the holders of debenture stock Chap. XVI. are not entitled to any priority inter se as regards debenture stock issued under the same special Act. Payment of the interest may be enforced by the appointment of a receiver, or by action. Holders of debenture stock have no right to vote as such at meetings of the company, and cannot require repayment of the principal money paid up in respect of it.3 Debenture stock, therefore, confers a right to a perpetual annuity payable out of the undertaking of the company, and the holder differs from a debenture holder in that he has no right to the repayment of his capital, though he has a charge for his interest. He is a creditor and not a member of the company, and receives only a fixed rate of interest whatever the net profits 4 of the company." A company registered under the Companies Act, 1862, may under Companies. issue debenture stock if empowered by its memorandum of associaAct, 1862. tion to do so; and perhaps under a general borrowing power.7 But debenture stock of such companies differs from debenture stock issued under the Companies Clauses Act, 1863, in that the principal as well as the interest is generally charged on the company's property, and that the company is bound to repay the principal.7 discount. Debentures may be issued at a discount in the absence of pro- Issue at vision to the contrary.8 Limited companies registered under the Companies Act, 1862,9 are required to keep a register of all mortgages and charges affect ing their property, and to allow it to be inspected and copies to be 10 taken, but an unregistered mortgage is valid." Acts. Debentures issued by "any mortgage, loan, or other company Bills of Sale and secured upon the capital stock or goods, chattels and effects of such company are exempted from the operation of the Bills of Sale Act, 1882.12 This exemption is not confined to companies Chap. XVI. ejusdem generis with mortgage and loan companies; and every company authorized to raise money on loan or mortgage is a company ejusdem generis with a "mortgage or loan" mortgage or loan" company.' Debentures of any incorporated company which is required to keep a register of mortgages, as, for instance, companies subject to the Companies Clauses Consolidation Act, 1845,2 or the Companies Act, 1862, or a deed of charge to cover such debentures, are not bills of sale within the scope of the Bills of Sale Act, 1878,* for they are not secret documents, or documents of the class by which frauds were perpetrated upon creditors by means of secret bills of sale.5 Registration of mortgages and charges. Local Loans 3 Now, by the Companies Act, 1900, a company must register every mortgage or charge (created after the 31st Dec. 1901), which is, (1) for the purpose of securing any issue of debentures, or (2) on uncalled capital, or (3) created or evidenced by an instrument which, if executed by an individual, would require registra tion as a bill of sale, or (4) a floating charge on the undertaking or property. Unless registered within 21 days after its creation, it is void against the liquidator and any creditor of the company, but without prejudice to any obligation to repay the money secured. The registrar must give a certificate of registration, which is conclusive evidence of due registration, and a copy must be endorsed on every debenture. The register may be inspected by any person; and a company must keep at its offices copies of all registered instruments of mortgage or charge, which may be inspected by members and creditors. The time for registration may be extended, and mistakes and omissions may be rectified." The Local Loans Act, 1875,10 contains provisions as to the raising of loans by local authorities on the security of debentures, debenture stock, or annuity certificates. The Act does not confer any fresh powers of borrowing, but presupposes that the local authority has aliunde power to borrow in one or all of these forms. 145 & 46 Vict. c. 43; see s. 17. See Re Standard Co., [1891] 1 Ch. 627. 28 & 9 Vict. c. 16. 3 25 & 26 Vict. c. 89. 441 & 42 Vict. c. 31. See Re Standard Co., [1891] 1 Ch. 627; Richards v. Kidderminster Overseers, [1896] 2 Ch. 212. Ante, r. 107. 663 & 64 Viet. c. 48, s. 14. 7 Ante, Ch. VII. Re Yorkshire Assoc., [1903] 2 Ch. 284. 9 Ib. s. 15. Re Johnson & Co., [1902] 2 Ch. 101; Re Harrogate Estates, Ld.. [1903] 1 Ch. 498; Re Anglo-Oriental Co., Ib. 914. 10 38 & 39 Vict. c. 83. CHAPTER XVII. EXECUTIONS. WE proceed to discuss the methods of enforcing a judgment Chap. XVII. debt against the personal estate1 of the debtor by execution.2 creditor not a purchaser. execution. It is a general principle, with regard to both real and personal Judgment property, that a judgment creditor is not a purchaser, that he stands in the shoes of the judgment debtor, and can obtain by execution only such property as belongs to the debtor both at law and in equity; he must take subject to all prior interests created by the debtor for value, whether legal or equitable.* Generally execution can be levied without leave, but in certain Leave to issue cases leave must be obtained, the most important instances being where six years have elapsed since the judgment or order, or any change has taken place, by death or otherwise, in the parties entitled or liable to execution, or a husband is entitled or liable to execution on a judgment for or against a wife, or upon a judgment of assets in futuro, or a party is entitled to execution against any of the shareholders of a company on a judgment against such company or a public officer or other person representing the company. 6 5 When a company is being wound up execution against the 1 As to methods of enforcing a judgment against the land, including chattels real, of the debtor, see M. L. R. P. 382. "Execution signifieth in law the obtaining of an actual possession of anything acquired by judgment of law, or by a fine executory levied, whether it be by the sheriff or by entry of the party;" Co. Litt. 154a. "An action is said in its proper sense to continue until judgment be given, and after judgment doth process of execution begin"; Co. Litt. 289a. See as to executions generally, R. S. C., Ord. XLII. Anderson on Executions. 3 Jennings v. Mather, [1902] 1 K. B. 1. See Whitworth v. Gaugain, 1 Ph. 728, Cr. & Ph. 325, and other cases explained in Elph. & Cl. Searches, 10; Dolphin v. Aylward, L. R. 4 H. L. 500, per Ld. Hatherley, C.; Davey v. Williamson, [1898] 2 Q. B. 194; Simultaneous, &c. Syndicate v. Foweraker, [1901] 1 K. B. 771; Duck v. Tower Co., [1901] 2 K. B. 314. |