GEORGE COHEN (W.A.) LTD. v. COMET CONSTRUCTION CO., LTD.; GHANA COMMERCIAL BANK (CLAIMANTS) [1966] GLR 777

Division: HIGH COURT, ACCRA

Date: 5 DECEMBER 1966

Before: EDUSEI J.

CASES REFERRED TO

(1) Re Standard Manufacturing Co. [1891] 1 Ch. 627; 60 L.J.Ch. 292; 64 L.T. 487; 39 W.R. 369, C.A.

(2) Re Opera Ltd. [1891] 3 Ch. 260; 60 L.J. Ch. 839; 65 L.T. 371; 39 W.R. 705, C.A.

(3) Davey & Co. v. Williamson & Sons Ltd.; Richards’ Claimant [1898] 2 Q.B. 194; 67 L.J.Q.B. 699; 78 L.J. 755; 46 W.R. 751 ; 425 S.J. 525.

(4) Duck v. Tower Galvanizing Co.; Callund, Claimant [1901] 2 K.B. 314; 70 L.J.K.B. 625; 84 L.J. 874.

(5) Heaton and Duggard, Ltd. v. Cutting Brothers, Ltd.; Pain, Claimant [1925] 1 K.B. 655; 94 L.J.K.B. 673; 132 L.J. 41; 41 T.L.R. 286.

(6) Evans v. Rival Granite Quarries, Ltd. [1910] 2 K.B. 979; 79 L.J.K.B. 970; 26 T.L.R. 509; 54 S.J. 580, C.A.

NATURE OF PROCEEDINGS

INTERPLEADER SUIT wherein the claimants claimed two vehicles secured to them by a debenture. The facts are fully set out in the judgment of the court.

COUNSEL

Mrs. E. M. Arthur for the claimants.

T. K. Agadzi for the plaintiffs.

JUDGMENT OF EDUSEI J.

The facts of this interpleader suit are briefly these. In June 1964 George Cohen (W.A.) Ltd. recovered judgment in the High Court against the Comet Construction Co., Ltd. for a certain sum of money. In January 1965, not having received payment, the judgment creditors issued a writ of fi. fa. against the chattels of the judgment debtors as disclosed in exhibit C. The chattels referred to in exhibit C are (a) one only Morris pick-up No. SG 3554 and (b) one only Morris tipper truck No. SG 1059, and the sale was to take place on 6 July 1966. When this fact of seizure came to the knowledge of the Ghana Commercial Bank, the claimants herein, they interpleaded asserting that by virtue of exhibit A, a debenture, dated 1 February 1963, the said chattels disclosed in exhibit C among other property of the execution debtors were secured to them.

Both counsel agreed that the facts in this interpleader suit were indisputable and the only question of law to be decided by this court is whether the execution creditors or the claimants have prior claim to the chattels stated in exhibit C.

This question compels me to examine the exact nature of the rights of the holders of such a debenture. That the debenture, if valid,

[p.779] of [1966] GLR 777 undoubtedly creates a charge on the assets of the company is now well established ever since: see Re Standard Manufacturing Co.1 and Re Opera Ltd.2 These cases decide that such charges prevail as against an execution creditor if the debenture is valid.

It will be observed that the chattels mentioned in exhibit C come under category 4 of paragraph (4) of exhibit A and are a floating charge. And, what is a floating charge? A floating charge which is quite distinct from a specific charge does not fasten on any definite property but is an equitable charge on property which is constantly changing, for example, stock-in-trade: see Charlesworth’s Company Law (7th ed.), p. 242. Also in Gower’s Company Law (2nd ed.) at p. 390 it is stated that a floating charge imposes a charge on property present and future and it allows the company to continue to deal with that property in the ordinary course of business. However, if the debenture holder, on the happening of some event stated in the debenture takes steps to have the floating charge crystallised the charge then becomes a specific or fixed charge. Crystallisation takes place, among other things, when a receiver is appointed, and in such circumstances the company, and in this case, the judgment debtors, cannot deal with the property comprised in the security without the consent of the debenture holders. In the instant case a receiver and manager was appointed on 12 August 1963 by the claimants in accordance with paragraph 10 (a) of exhibit A and it was at a time when the execution creditors had not issued their writ of fi. fa. which was on 14 January 1965. The notice of appointment of a receiver and manager appeared in the Commercial and Industrial Bulletin No. 2 of 10 January 1964 and this Bulletin forms part of the Ghana Gazette which constitutes notice. But counsel for the execution creditors has raised the all-important point that at the time of the seizure of chattels mentioned in exhibit C there was no registration of exhibit A with the registrar of companies in accordance with the provisions of the Companies Code, 1963,3 and therefore there was no notice to third parties like the execution creditors who must take in preference to the claimants. In fact the registration of exhibit A took place on 4 October 1965; see exhibit B. This, no doubt, was subsequent to the seizure of the chattels by the execution creditors. But the matter does not rest there. Section 6 of the Companies Code, 1963, states thus, “Nothing in this Code shall abrogate or affect any special legislation relating to companies carrying on the business of banking, insurance or any other business from time to time subject to special

[p.780] of [1966] GLR 777 regulation.” (The emphasis is mine.) The claimants who are bankers, the Ghana Commercial Bank, have special legislation governing their activities. I here refer to the Bank of the Gold Coast Ordinance, 1952,4 and later amended by the Ghana Commercial Bank (Amendment) Ordinance, 1957,5 to read “Ghana Commercial Bank.” There is no legal obligation in this special legislation on the claimants to register their debentures as is required in the case of ordinary trading companies. The claimants, however, did perhaps ex abundanti cautella publish the appointment of a manager and receiver in respect of the property of the execution debtors in the Commercial and Industrial Bulletin of 10 January 1964. The appointment of the said manager and receiver took effect from 12 August 1963 and there was another appointment revoking that of 12 August 1963 and this appeared in the Commercial and Industrial Bulletin No. 47 of 30 September 1966 but the new appointment had its effective date from 15 March 1965. For the purposes of this suit the first appointment on 12 August 1963 is the only material factor to be considered. This appointment should have put the execution creditors on their guard as to their rights to go against the chattels in exhibit C. The decided cases, however, tend to support the contention of the claimants, for in Davey & Co. v. Williamson & Sons Ltd.; Richards, Claimant6 it was held that the rights of the debenture holders prevailed over those of the execution creditor since, the goods seized being validly charged with payment of the debentures, there was no interest of the company in them available to satisfy the judgment debt. Again in Duck v. Tower Galvanizing Co.; Callund, Claimant7 it was decided that the rights of a bona fide holder for value of a debenture which was in proper form and charged all the property of the company as security for a debenture debt, prevailed over those of an execution creditor, even where the debenture was issued without authority, no directors of the company having been appointed and no resolution to issue debentures passed; provided that the holders had no notice of any irregularity in the issue of the debenture. A fortiori, the claimants herein, the Ghana Commercial Bank, are in a much better position since the debenture was regularly issued, see exhibit A. Counsel for the execution creditors referred me to two authorities which I think are distinguishable from the cases adverted to earlier on. One of such cases is Heaton and Duggard, Ltd. v. Cutting Brothers, Ltd.; Pain, Claimant.8 In that case judgment had been recovered in an action against a limited liability company, [p.781] of [1966] GLR 777 which had issued debentures giving a floating charge over its property, execution was issued under a writ of fi. fa. and the sheriff went into possession. In order to avoid a sale of the company’s property the managing director paid the judgment debt and costs, whereupon the sheriff withdrew. Thereafter, and before the sheriff paid the amount of the debt and costs to the execution creditors the debenture holders in the defendant company appointed a receiver, who claimed to be entitled to the money in the hands of the sheriff and it was held that the money was paid to the sheriff as a debt owing by the defendants to the execution creditors who were therefore entitled to retain it as against the receiver. The reasoning underlying this decision is easy to grasp. Here the debtor company had of course an implied licence from the debenture holders to carry on its ordinary business, the debt in question was a trade debt due to the judgment creditors. Under pressure of the execution, and to avoid sale, the debtors paid their debt. They did not send the money direct to the judgment creditors, which it may be they might have done; they paid it to the sheriff in order that he might pay it over to the judgment creditors. In that way they paid their debt. In the other case of Evans v. Rival Granite Quarries, Ltd.9 the ratio decidendi of the judgment was that the debenture holder did not take any step to crystallise his floating charge. But it was not so in the instant case where crystallisation had taken place before seizure by the execution creditors. In the case of Davey & Co. v. Williamson & Sons Ltd.10 Lord Russell of Killowen C. J. who read the judgment of the court had this to say and what he said there is equally applicable in the present case: “In this state of things the question is, Do the rights of the debenture holders prevail against those of the executor creditor? It may seem hard upon the execution creditors that they should not be able to realize their judgment for their debt incurred in supplying trade goods for the purposes of the company’s business, and that they should be met by claims of debenture holders of which they had no knowledge or public means of knowledge, and that such debenture holders should be allowed to claim as their goods in the apparent control of the company, and upon which possibly, or indeed probably, credit had been given to them. But these are matters which concern the judgment and action of Parliament.”

In the result I decide that the claimants herein, the Ghana Commercial Bank, have priority over the execution creditors and I

[p.782] of [1966] GLR 777 accordingly give judgment for the claimants. I order that the vehicles Nos. SG 3554 and SG 1059 be released from attachment forthwith. I shall assess the costs in this interpleader suit which was well argued from both sides at ¢180.00 against the plaintiff-judgment creditors.

DECISION

Judgment for the claimants.

S. K. T.