Receivers and managers.

Sales.

AS TO RECEIVERS AND MANAGERS :

In actions to enforce mortgage debentures an early application is commonly made for a receiver, or where there is a business to be carried on, for a receiver and manager, and if the company has made default in the payment of principal or interest there is generally but little difficulty in obtaining the appointment. See Hopkins v. Worcester & Bir. Canal, 6 Eq. 437; Perry v. Oriental Hotels Co., 5 C. 420; Peek v. Trimsaran Co., 2 C. D. 115; Boyle v. Bettws Colliery Co., 2 C. D. 726; and infra, Forms 244 et seq.

Where a company is being wound up by the Court it is generally considered desirable, if there is to be a receiver of any part of the assets, that the same person should be both receiver and liquidator. Accordingly, if when the application for a receiver is made, a liquidator has already been appointed, the liquidator is generally appointed receiver; and where a receiver has been appointed in the action before the winding up, he is sometimes appointed liquidator by the Court. If after the appointment of a receiver a winding up order is made, the receiver (unless he is appointed liquidator) is usually discharged and the liquidator appointed in his place.

Thus, in Louth v. The Western of Canada Co. (incidentally mentioned in 17 Eq. 1), a receiver and manager was appointed (Malins, V.-C. 31 July, 1873, B. 2170), and the same person was subsequently appointed official liquidator. The same course was adopted in Peek v. Trimsaran Co., M. R., 12 May, 1876. In D'Oyley v. British Chemical Co., the provisional liquidator was appointed receiver. Bacon, V.-C., 29 June, 1876, A. 1657. In Brown v. Wedgwood Co., the same person was by a single order appointed to both offices. Malins, V.-C., 2 Aug., 1875, B. 257.

In Perry v. Oriental Hotels Co., 5 C. 420, the liquidator was appointed receiver. The same thing was done in Wethered v. Yniscedwyn Co., M. R., Jan., 1877, and in Slater, on behalf, &c., v. Darlaston Steel Co., M. R., 2 June, 1877, B. 1396; M. R., Jan., 1877. In Campbell v. Compagnie Générale de Bellegarde, 2 C. D. 181, an order was made discharging the receiver and appointing the liquidator receiver. Bacon, V.-C. In Robinson v. Canada Tanning Co., it was ordered that the same person should be receiver and liquidator, with liberty for the plaintiff to propose a person as liquidator: Form 291, infra.

But where the winding up is voluntary the practice is not always followed; and, in any case, special circumstances as to the presentation of the property will be taken into consideration. Boyle v. Bettws Colliery Co., 2 C. D. 726. For various orders appointing receivers and managers with and without security, &c., see infra, Forms 244, et seq.

AS TO SALES :

In actions to enforce mortgage debentures, a sale of the property is generally requisite. The order is usually made at the hearing, but not

uncommonly (by consent or otherwise) it is made upon an interlocutory application. See Davis v. Ashwin, 26 W. R. 139, where a sale of the company's colliery was ordered under section 55 of the Chancery Procedure Act, 1852, upon an interlocutory application. In this case there was a trust deed, but where there is no trust deed, and accordingly the action is an ordinary foreclosure action, it seems doubtful whether a sale can (except by consent) be ordered before the hearing. London & County Banking Co. v. Dover, 11 C. D. 204.

A sale is generally directed to be made in the usual way, viz., with the approbation of the Court. See Forms 248, et seq. However, occasionally a sale out of Court is directed. See Form 242, infra. Sometimes the receiver or plaintiff enters into a provisional agreement for sale, and applies for the sanction of the Court. See various orders as to sales, infra.

AS TO MEETINGS OF DEBENTURE HOLDERS:

Meetings of debenture holders are sometimes called by direction of Meetings. the Court for the purpose of ascertaining their views as to the mode of dealing with the mortgaged property. See infra, Form 260.

And where the company is in liquidation meetings are not uncommonly called in the action and winding up for the purpose of approving an arrangement under the Joint Stock Companies Arrangement Act, 1870. See infra, "Arrangements."

AS TO BORROWING :

Liberty to the receiver to borrow money in order to carry on the Borrowing. company's business, and for other purposes, is very commonly given in actions by mortgage debenture holders. See Forms, infra, 255.

It may here be observed that where there is a trust deed the trustees sometimes bring an action to have the trusts carried into execution under the order of the Court. This is not uncommon where the company has made default, and the trustees ought to take possession, for they generally desire to act under the direction of the Court, and also where some hostile debenture holder is taking or likely to take proceedings. For examples of such actions, see Campbell v. Compagnie Générale de Bellegarde, Limited, 2 C. D. 181, and Forms 241, infra.

AS TO THE POWER TO ISSUE DEBENTURES:

First, as to the power of a company.

Company's

This must depend upon whether the company has power (1) to borrow, power to issue and, if it is proposed to issue mortgage debentures, (2) to mortgage.

With regard to the power to borrow, the memorandum very commonly contains express power, and, if so, no doubt can exist; but, even where this is not the case, the nature of the business of the company, and the

debentures.

Power of directors.

general words contained in the memorandum are usually sufficient to imply a power as to this. See further, supra, p. 72.

A power to mortgage its property is also very commonly inserted in the memorandum, but this too may arise by implication. Thus In re Patent File Co., 6 C. 85, Mellish, L. J., said: "It was argued that no company can mortgage unless expressly authorised to do so. Now the company has property which it is authorised to deal with, and I should say that the true rule is just the contrary; namely, that a company can mortgage unless expressly prohibited from doing so. The 43rd section of the Act appears to recognise the creation of mortgages as an ordinary incident to a company." See further as to this supra, p. 72.

If the debentures are to be to bearer, the further question arises, whether the company has power to issue negotiable or quasi negotiable instruments, for the Companies Act, 1862, does not confer on all companies registered under it a power of issuing negotiable instruments. Such a power only exists where, upon a fair construction of the memorandum of association it was intended to be given. See further as to this, supra, p. 71.

Next with regard to the power of the directors to issue debentures on behalf of the company. This must of course depend on the articles of the company. Express powers are generally given to them [supra, p. 111], but general powers are sufficient, supra, p. 129.

A power to raise money upon all or any part of the property of the company or upon debentures, notwithstanding the alternative form, warrants the issue of mortgage debentures. In re Panama, &c., Co., 3 C. 322.

In some cases the directors only have power to issue debentures with the sanction of a special resolution or of the company in general meeting; and in such cases the necessary sanction ought of course to be obtained, but it does not follow that debentures irregularly issued will be void. Royal British Bank v. Turquand, 6 E. & B. 327.

It was doubted by Rolt, L. J., in re Blakely Ordnance Co., 3 C. 159, whether the mere power of issuing debentures would authorise the directors of a company to issue debentures to be transferable free from equities. He held however that the articles in that case did give such an authority, for they expressly authorised the directors to carry into effect an agreement which provided for the issue by the company of debentures payable to bearer.

If therefore the articles empowered the directors to issue debentures payable to bearer, it would seem that no question can arise. But even if there be no such power given to the directors, provided that they are empowered to issue debenture bills and notes on behalf of the company, it will not be considered ultra vires on their part to issue debentures to bearer. In re Imperial Land Co. of Marseilles, 11 Eq. 478. See also In re General Estates Co., 3 C. 758; In re Marine Mansions, 4 Eq. 609; Inns of Court Hotel Co., 6 Eq. 82.

And at any rate if the company has power to issue debentures, it can by special resolution empower the directors to issue debentures transferable free from equities. This seems to follow from the decision in the Blakely, &c., Co., 3 C. 154.

If mortgage debentures are to be charged upon the uncalled capital As to charging of the company, it must be seen that the directors have power to do uncalled capital. this. Generally speaking, calls are to be made at the discretion of the directors, and unless they are expressly [supra, p. 112], or by necessary implication, empowered to mortgage the future calls, it will be ultra vires to do so.

A power to directors to borrow on the security of the "funds or property" of the company is not sufficient. Stanley's case, 4 De G. & S. 407; 33 L. J. N. S., C. 535. Nor is a power "to pledge mortgages or charge the works, hereditaments, plant, property, and effects of the company." Sankey Brook Coal Co., No. 2, 10 Eq. 381; nor a power "to mortgage or charge the property of the company." Bank of South Australia v. Abrahams, 6 P. C. 562. See also King v. Marshall, 33 Beav. 565; Lishman's case, 23 L. T. N. S., 759, it seems is not law. See also Bank of South Australia v. Abrahams, 6 P. C. 562.

But where the articles contained power to secure monies borrowed What sufficient "by mortgaging (inter alia) all or any future calls to be made on all or authority. any part of the shares of the company," it was held by Jessel, M. R., that a mortgage by the directors of future calls was valid. Phænix Bessemer Co.'s case, 44 L. J. N. S. 683.

uncalled

It was indeed at one time thought that a mortgage of uncalled capital Mortgage of could not be made where by the regulations calls were to be made by capital valid directors at their discretion. For it was said: "What would the if duly authoremedy be but the appointment of a receiver to get in those calls? rised. And how would it be possible for any receiver of this Court to exercise the discretion which, according to the deed, is reposed in the directors?" Per Lord Justice Turner; Stanley's case, 4 D. G. & S. 407; S. C. 33 L. J. N. S., C. 535.

However, in the recent case of the Phonix Bessemer Co., 44 L. J. N. S., C. 684, Jessel, M. R., observed, in reference to the passage just cited: "But with all possible respect to the Lord Justice, these difficulties are not difficulties to my mind at all. . . . Now if a company may at their discretion mortgage future calls, there must be some way to make the mortgage a good mortgage. You may appoint a receiver, and either order the directors to make calls and pay the proceeds to him, or you may order the receiver himself to make the calls."

What property a debenture purports to charge, is of course a question. of construction. In re Colonial Trusts Corporation, W. R. 1880, 3, and Form 453; Norton v. Florence Land Co., 7 C. D. 332; Anderson v. Butler's Wharf Co., W. N., 1879, 163.

Debentures may be issued at a discount. See In re Anglo-Danubian, Debentures &c., Co., 20 Eq. 339; In re Regent's Canal Ironworks Co., 3 C. Div. may be issued 43; Campbell's case, 4 C. Div. 470. See also supra, p. 129.

at a discount.

Registration as bill of sale.

Attestation.

Register of mortgages.

A trust deed or mortgage debenture comprising personal chattels (as defined by the Bills of Sale Act, 1878) must be registered as a bill of sale if it is desired to obtain the benefit of that Act. The result of nonregistration (in the case of a company) is to invalidate the security as against execution creditors (section 4), and also as against persons claiming under duly registered bills of sale, even though subsequently executed. Section 10.

But non-registration or non-compliance with the provisions of the Act does not invalidate a bill of sale as between the company and the grantee. Davies v. Goodman, 5 C. P. Div. 128; 28 W. R. 559; Hill v. Kirkwood, 28 W. R. 358. Nor as against the liquidator. Marine Mansions Co., 4 Eq. 601.

Nor has section 10 of the Judicature Act, 1875, rendered the bankruptcy rules as to order and disposition applicable in a winding up. Crumlin Viaduct Co., 11 C. D. 755.

Section 8 of the Bills of Sale Act, 1879, requires that every bill of sale shall set forth the consideration for which it was given, otherwise it will be void as against the persons mentioned in the section. It is sufficient if the consideration is substantially set forth. Ex parte National Mercantile Bank, Re Haynes, 28 W. R. 848; Hamlyn v. Pelletey, 5 C. P. D. 527 ; 25 WR. 956.

Trust deeds comprising personal chattels are not uncommonly registered, but in many cases the publicity of registration is considered so objectionable that a clause prohibiting registration is inserted in the deed.

Mortgage debentures, even though comprising chattels, are rarely, if ever, registered.

An instrument that is to be registered as a bill of sale must be executed and attested in accordance with the Bills of Sale Act, 1878. See infra, Form 169. Although that Act does not expressly apply to companies, it can scarcely be supposed that it was not intended to apply to them. How the attesting solicitor is to explain the instrument to the company has not been settled, but it is generally assumed that an attestation as below [Form 169] is sufficient.

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By section 43 of the Companies Act, 1862, it is provided that:

'Every limited company under this Act shall keep a register of all mortgages and charges specifically affecting property of the company, and shall enter in such register, in respect of each mortgage or charge, a short description of the property mortgaged or charged, the amount of charge created, and the names of the mortgagees or persons entitled to such charge. If any property of the company is mortgaged or charged without such entry as aforesaid being made, every director, manager, or other officer of the company, who knowingly or wilfully authorises or permits the omission of such entry, shall incur a penalty not exceeding fifty pounds."

Hence it is necessary where mortgage debentures, secured by a mortgage to trustees, are issued, duly to register the mortgage, and if there