In re Bill of Sale granted by Forest Development Company Ltd [1985] SBHC 21; [1985-1986] SILR 64 (3 June 1985)

1985-1986 SILR 64

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 31A of 1985

IN THE MATTER OF THE COMPANIES ACT

AND IN THE MATTER OF A BILL OF SALE GRANTED BY FOREST DEVELOPMENT COMPANY LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF AN APPLICATION BY HASTING DEERING (SOLOMON ISLANDS) LIMITED

High Court of Solomon Islands
(Wood C.J.)
Civil Case No. 31A of 1985

21 May 1985 at Honiara
Judgment 3 June 1985

Companies Act s.96 - extension of time for registration of a charge after winding-up order - prejudice to rights of other creditors

Facts:

On 22 November, 1984 the applicant executed a Bill of Sale for the sale on credit of two new tractors to the Forest Development Company Ltd. On 18 December 1984 the Bill was returned to Honiara from Brisbane to be stamped and lodged for registration as a Bill of Sale and company charge. The Registrar of Companies, however, on 20 December 1985 rejected the Bill of Sale as a company charge pursuant to s.90(1) of the Companies Act which provides that a charge must be delivered for registration within 21 days of its creation. On 2 May, 1985 the purchaser was ordered to be wound-up. The applicant then made this application praying for an order pursuant to s.96 of the Act that the time for registration be extended and that the Registrar record the Bill of Sale as having been registered on 19 December 1984.

Held:

The rights of all the creditors were vested on 2 May 1985, the date of the winding-up order. To allow registration of the charge after the winding-up had commenced would prejudice those vested rights, therefore it was not permissible to extend the time for registration after the winding-up had commenced. (Victoria Housing Estate Ltd v. Ashburton Estates Ltd. (1982) 3 All E.R. 665 and Re Resinoid and Mica Products Ltd. (1967) [1982] 3 All E.R. 677 followed).

Accordingly the application was dismissed.

Cases considered:

In re Spiral Globe Ltd [1901] UKLawRpCh 195; (1902) 1 Ch. 396
In re S. Abrahams & Sons [1902] UKLawRpCh 37; (1902) 1 Ch. 695
In re Joplin Brewery [1901] UKLawRpCh 161; (1902) 1 Ch. 79
Victoria Housing Estates Ltd. v. Ashburton Estates Ltd (1982) 3 All E.R. 665
Re Resinoid and Mica Products Ltd. (1967) [1982] 3 All E.R. 677

R. Gotterson for the Applicant
Kenneth Brown for the Petitioning Creditors of Forest Dev. Co. Ltd
Jamie Broughton for the Registrar of Companies and the Official Receiver and Liquidator of Forest Dev. Co. Ltd.

Wood CJ: On October 19, 1984 the applicant company sold two new tractors to Forest Development Company Limited for $298,800 on credit terms over a period of three years. On November 9, 1984 the purchaser executed a Bill of Sale which was forwarded to Brisbane to affix the Common Seal of the applicant company and for signature by its secretary. This was executed on November 22, 1984 and the tractors were delivered the following day. The Bill of Sale was not received in Honiara until December 18, 1984 when it was lodged for registration as a Bill of Sale and a company charge the fees for the latter being paid at the same time. The following day the Bill of Sale was stamped and relodged, but rejected on December 20, 1984 by the Registrar as a Bill of Sale and a company charge. The Bill of Sale was subsequently registered as a Bill of Sale but rejected by the Registrar of Companies as a company charge in terms of s.90(1) of the Companies Act which provides that a charge must be delivered to or registered by the Registrar of Companies for registration within twenty-one days after the date of its creation. Mr Gotterson conceded that the date of creation of the Bill of Sale could only be November 9, 1984 and that when it was lodged for registration on 18th and 19th December it was well out of time as a company charge. In his letter dated December 20, 1984 the Registrar of Companies expressly states that he was unable to register the Bill of Sale under s.90 of the Companies Act as it was presented for registration more than 21 days after the date of its creation. He repeated this statement in a subsequent letter dated February 13, 1985 and also advised the applicant that s.90(3) of the Companies Act did not apply to the facts of this case but the provisions of s.96 of the Companies Act were drawn to their attention. The applicant was advised that he would have to apply to the High Court in terms of s.96. No such action was taken however and over the following two weeks nothing happened except that the applicant alleges he was given bad legal advice. On March 4, 1985 he was told that a petition to wind-up Forest Development Co. Ltd had been presented (which was in fact presented on March 8, 1985) and the company was wound-up by order of the Court on May 2, 1985.

The applicant’s summons filed on May 17, 1985 asks this Court to make:-

“An order pursuant to s.96 of Companies Ordinance that the time for registration of a Bill of Sale granted by Forest Development Company Limited to Hastings Deering (Solomon Islands) Limited and bearing date the 9th day of November 1984 and that the Registrar of Companies record the said Bill of Sale as having been registered on and from the 18th day of December 1984.”

In Court Mr Gotterson amended this date to December 19, 1984 as being the date the Bill of Sale was stamped and relodged.

There are many judicial decisions concerned with s.96 of the Companies Act and the judge’s discretion to grant an extension of time. Extension of time may be granted if the omission 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. Mr Brown has conceded that if this application had been brought expeditiously before the Court when the Registrar of Companies refused to register the charge the Court would have almost certainly granted the application. In view of this I do not think I need deal with Mr Gotterson’s submissions on his client’s position as at December 19, 1984 as this is not in issue. His next submission is of greater difficulty in that he submits that I need look no further than December 19, 1984 to grant the application and that subsequent events are irrelevant in deciding to exercise my discretion in the applicant’s favour. Mr Gotterson submitted that this case has a novel feature which is that the charge was in fact lodged and the fees paid some five months before this application was made on May 17, 1985. All the decided cases deal with the normal situation where no attempt has been made to lodge the charge but the Court is asked to extend time to enable the charge to be registered. It seems to me that what Mr Gotterson is asking me to do is to validate the attempted registration on December 19, 1984 rather than extend time for registration of the company charge. The fact remains that the charge has not been registered.

Mr Brown’s main argument is that a petition to wind-up Forest Development Co. Ltd was filed on March 8, 1985 and the Company was wound-up by order of the Court on May 2, 1985. The present application was filed on May 17, 1985 and none of the decided cafes have ever supported such an application where the company is in liquidation or liquidation is imminent. He also argues that in no case has the Court ever backdated an order for extension of time. Mr Broughton has added that when a winding-up order is made it is the rights of all the creditors which have to be taken into account and that there is little in the applicant’s case to justify taking away the existing rights of unsecured creditors in favour of the applicant company.

The cases of In re Spiral Globe Ltd [1901] UKLawRpCh 195; (1902) 1 Ch. 396 and In re S. Abrahams & Sons [1902] UKLawRpCh 37; (1902) 1 Ch. 695 were both concerned with the situation where the debtor companies were in liquidation. They are authority for the proposition that although the fact that a winding-up order has been made does not prevent an order for extension of time such an order can only be made with the inclusion of the proviso as set out by Buckley J In re Joplin Brewery [1901] UKLawRpCh 161; (1902) 1 Ch. 79 which is, “but that this order be without prejudice to the rights of parties acquired prior to the time when the debentures shall be actually registered.”

In the Abrahams case Buckley J stated the following:-

“Unless in very exceptional cases, I think that orders extending the time for registration ought to be qualified as in In re Joplin Brewery Co. I am unable to see how, if a winding-up has commenced, an order containing the words inserted in the order made in that case can do anybody any good. If you have secured and unsecured creditors of a company in liquidation, you must, under an order in the form in In re Joplin Brewery Co., first pay the secured creditors in full or to the extent of the assets. If there is a surplus after paying the secured creditors in full, the debenture-holder whose debenture has not been registered in time, and who obtains an extension of time on the terms imposed in In re Joplin Brewery Co. cannot claim priority over but will come in pari passu with the unsecured creditors, and this position he would obtain without any order from the Court under s.15 of the Act of 1900.”

Victoria Housing Estates Ltd. v. Ashburton Estates Ltd (1982) 3 All E.R. 665 and Re Resinoid and Mica Products Ltd (1967) [1982] 3 All E.R. 677 were both case in which liquidation was imminent when application was made to the Court to extend time. In the latter case Lord Denning MR said:-

“In the course of the argument Russell LJ suggested that it was too late now to extend the time for registration, for the simple reason that the winding-up commenced on 27 October 1966. The rights of all parties are to be determined as at that date. The rights could not, and should not be prejudicially affected by subsequent registration of a charge. In cases where time is extended before the winding up has commenced, it is the invariable practice of the Court to insert words saving the rights of parties acquired prior to the time when registration is in fact made.

If registration were allowed after the winding-up has commenced, it would affect the rights of parties accrued beforehand. This cannot be allowed. I do not think it is permissible to extend the time for registration after the winding-up has commenced.”

Both Lord Denning and Russell LJ decided that the fact of liquidation before the application reached the High Court or the Court of Appeal precluded an extension of time for registration.

In the Victoria Housing v. Ashburton case the Court followed Lord Denning’s dicta in the Resinoid case and rejected Victoria’s counsel’s submissions which were not very dissimilar from those of Mr Gotterson in the case before me. Lord Brightman said at page 675, “In our opinion this submission, even if it has merit, is 80 years too late.”

In the case before me rights were vested in all the creditors of Forest Development Co. Ltd on May 2, 1985 the date this Court made the winding-up order and I cannot see how I can now make the order asked for without prejudice to those rights.

In my judgment the words of Lord Denning MR and Russell LJ in the Resinoid case quoted above give the complete answer to this application. The applicants are too late in coming to Court after the winding-up order was made on May 2, 1985. If they had brought the matter before me earlier in the year no doubt I would have granted an extension of time but I cannot do so now.

This application is dismissed with costs.