| Company — Charge — Registration — Chargee failing to register charge within 21 days — Court extending time for registration but reserving power to review extension — Registrar of Companies erroneously issuing certificate of registration — Whether order extending time capable of review or variation — Companies Act 1985 (c 6), ss 401(2), 404
Ali v Top Marques Car Rental Ltd and another
Ch D: Michael Furness QC: 3 February 2006
Where the court made an order extending time for the registration of a legal charge created by a company and the order provided that the company, its administrators or any unsecured creditor had permission to apply within 14 days to set it aside, there was an implied direction that the Registrar of Companies would not issue a certificate of registration while the order remained capable of review. Where, however, the registrar issued a certificate in breach of that direction, the charge was properly registered and the order extending time to register could no longer be set aside or varied.
Mr Michael Furness QC, sitting as a deputy High Court judge in the Chancery Division, so held when ordering that a charge which the claimant, Younus Ali, claimed had been granted to him by Top Marques Car Rental Ltd, had been validly registered and took priority over the unsecured creditors in the administration. The joint administrators of the company and the Registrar of Companies were the first and second defendants.
The claimant contended that in return for a loan made to T Ltd he had been granted a legal charge over property owned by the company. The claimant had failed to register the charge within 21 days as required by s 395(1) of the Companies Act 1985. Accordingly, he had applied under s 404(1) of the1985 Act for an extension of time for the registration. On that application the had judge made an order in In re Charles form (In re Charles (LH) & Co Ltd [1935] WN 15), namely in a form in which the court reserved the power to reconsider whether the extension should be granted. The registrar’s practice where such an order was made was to register the charge on receipt of the order, but to refrain from issuing a certificate unless and until it became clear that the extension of time was not going to be revoked. The reason the registrar did not issue a certificate while the extension remained susceptible of revocation was that s 401(2) of the 1985 Act provided that a certificate was “conclusive evidence that the requirements …as to registration have been satisfied”. However, in the instant case, the registrar mistakenly issued the claimant with a certificate. The administrators sought an order setting aside the order extending time for registration.
HIS LORDSHIP said that the effect of an In re Charles order was that the extension of time was granted on terms which included, by implication, a direction to the registrar not to issue a certificate while the order remained capable of review. Accordingly the registrar had breached that implied direction in issuing the certificate. It followed that the certificate should not have been issued, and that its issue was contrary to the intentions of both the court and parties at the time the judge had made the order. However, the judge’s order was beyond recall once the certificate had been issued. The claimant no longer needed to refer to the order to demonstrate that his charge was registered within time; the certificate alone was sufficient for that purpose. The circumstances in which it was issued did not affect the conclusive nature of the certificate. Because of the conclusiveness of the certificate there was simply no point in setting aside the order for extension of time. Furthermore, there was no jurisdiction to vary the order postponing the claimant’s charge behind the interests of the unsecured creditors. Under s 404(2) of the 1985 Act the court could impose terms on the granting of an extension of time. However, once a charge had been properly registered there was no jurisdiction independent of s 404(2) which allowed the court to restrict the priority afforded by a charge just because the court thought that the circumstances in which the charge had been registered justified doing so.
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