IN RE THE STANDARD BANK OF AUSTRALIA (IN LIQUIDATION), EXPARTE Held, that although the secured creditors upon finding the securities deficient could not call upon the new company to satisfy the deficiency in the manner arranged under the scheme, yet they retained their rights as mortgagees against the old company which could be enforced against the new company as the purchaser of the equity of redemption, and for this purpose the old company, if necessary, could be compelled to lend its name to enforce such rights. Form of order. THIS was an application by the liquidator of the City of Melbourne Bank Limited, as a creditor of the Standard Bank of Australia Limited (in liquidation), to have certain questions which had arisen in the liquidation of the Standard Bank and the City of Melbourne Bank determined by the Court. The following were the questions contained in the notice of motion-(1). For what amount or amounts, or on what basis is the City of Melbourne Bank Limited (hereinafter called the creditor company) entitled to claim-(a) as a secured creditor and (b) as an unsecured creditor of the abovenamed company (hereinafter called the old company), and in particular on what basis or as on what date or dates should its securities be valued or its claims be ascertained for such purpose or for the purpose of the questions next following? (2.) Is the creditor company on valuing its securities or otherwise entitled as an unsecured creditor of the old company, or otherwise, respect of any and what amount, or on any and what basis, to receive any and what deposit receipts of or shares in the StanV.L.R., Vol. XXIV. in T 1898 July 25, August 3, 9. Holroyd, J. 1898 In re dard Bank of Australia Limited (hereinafter called the new company), or cash payments or any and what benefit under or STANDARD BANK by reason of the scheme of compromise or arrangement between THE OF AUSTRALIA the old company and its creditors, as sanctioned by this Court (IN LIQUIDATION) On the 28th June 1893, and modified by the supplementary Holroyd, J. scheme sanctioned by this Court on the 6th August 1895 ? (3.) Is the old company or its liquidator entitled to require from the new company any and what deposit receipts, shares, or cash payments in respect of any and what part of the claim of the creditor company as aforesaid? (4.) Is the creditor company entitled to require from the old company or its liquidator that it or he shall procure for the creditor company or from the new company that it shall deliver or pay to the creditor company such deposit receipts, shares, or cash payments as aforesaid? The affidavit of Mr. Jacomb, the liquidator of the City of Melbourne Bank, stated that the Standard Bank had gone into liquidation in 1893, and that shortly afterwards the old company entered into a scheme of compromise or arrangement with its creditors, which was duly sanctioned by the Court. The new company was duly incorporated. At the commencement of the winding-up of the old company it was largely indebted to the City of Melbourne Bank, but the latter did not prove its claim, because it was considered by both parties that the securities held by the City of Melbourne Bank were sufficient to cover the amount of its claim, and no arrangement of any kind was made. These securities have since depreciated, and Mr. Jacomb sent in a claim to the general manager of the new company, and in consequence of the difficulties raised he proceeded by way of motion to have the question decided by the Court. The scheme of compromise or arrangement between the Standard Bank and its creditors contained the following clauses inter alia: III. That a new company be formed with a capital of 1,000,000l. divided into 91,989 preference shares of 51. each and 108,011 ordinary shares of 51. each for the purpose (with other purposes) of acquiring all the property and assets of the old company subject to the debts and liabilities thereof the new company undertaking to pay satisfy and discharge all the liabilities of the old company in manner as hereinafter provided 1898 In re THE STANDARD BANK OF Holroyd, J. XII. Every creditor of the old company save as provided AUSTRALIA by clause xv. hereof shall be entitled to receive the deposit (IN LIQUIDATION) receipt of the new company for two-fifths (as near as practicable) of the amount of principal and interest owing to each creditor at the date of the registration of the new company. And the principal amount of such deposit receipt shall be payable at the expiration of five years from the date of the incorporation of the new company but the new company shall have the option of paying off before maturity a rateable proportion of the amount of any deposit receipt. . In "XIII. Every creditor of the old company save as provided by clause xv. hereof shall also be entitled to receive either (a) preference shares in the new company credited as fully paid up equal in nominal value to the amount of principal and interest mentioned in clause xii. hereof and not therein provided for or (b) a deposit receipt of the new company for the balance. of the amount of the principal and interest. default of notice within the time hereinbefore fixed for exercising such option those of the creditors of the old company who were on the 28th April 1893 corporations charitable bodies without the legal power to take preference shares in the new company shall be treated as having elected to take a deposit receipt payable 10 years from the date of incorporation as aforesaid and all other creditors of the old company shall be treated as having elected to take preference shares. "XV. Every creditor of the old company not being a creditor holding a security over any portion of the assets of the old company shall accept the provisions made for him by clauses xii., xiii., xiv., of this scheme in satisfaction and discharge of all claims against the old company and shall at the time of his application for the deposit receipt of the new company deliver up to the new company to be cancelled all deposit receipts and drafts or other similar documents issued to him by the old company." The other facts material to this report are set out in the 1898 In re STANDARD BANK OF AUSTRALIA Holroyd, J. judgment. The motion came on for hearing before Hol Weigall for the liquidator of the City of Melbourne Bank (IN LIQUIDATION) Limited-The scheme of reconstruction provided for the new company obtaining the assets of the old company subject to its liabilities. Those liabilities the new company must discharge and they included the debts owing to the secured creditors. There is nothing in the scheme which says that the secured creditors are to lose all their remedies; it does not interfere with them, it leaves their liabilities still outstanding, and the new company has undertaken to pay such liabilities. The secured creditors are bound by the scheme, but they surrender no rights. Higgins for the Standard Bank-It would be very unjust to allow the secured creditors to step in now and take advantage of the assets which have been saved by the company under its reconstruction. The scheme contemplates that all creditors are to be bound, but the secured creditors are to get nothing except what they can realize out of their securities. Under this scheme the mode of discharging their liabilities is distinctly defined, and it expressly excludes secured creditors, and the undertaking is to discharge all liabilities in the manner provided by the scheme. Cur. adv. vult. HOLROYD, J. On the 28th June 1893 a scheme of compromise between the Standard Bank of Australia Limited, then in course of liquidation, and its creditors was sanctioned by the Court. By the terms of this agreement a new company was to be formed for the purpose of acquiring all the assets of the former one, subject to its liabilities, all which the new company was to undertake to discharge in manner therein. provided. So far as it is necessary to state the manner indicated, it was this: Under clause xii. every creditor of the old company, save as provided by clause xv., was to be entitled to receive a deposit receipt of the new for two-fifths, as nearly 1898 In re THE OF Holroyd, J. practicable, of the amount of the principal and interest owing to such creditor at the date of registration of the new company, such deposit receipt to bear interest at a certain rate, and the STANDARD BANK principal to be payable at the expiration of five years from that AUSTRALIA date. Furthermore, by clause xiii., every creditor of the old (IN LIQUIDATION) company, save as provided by clause xv., was to be entitled to receive either preference shares in the new company, credited as fully paid up, equal in nominal value to the balance of principal and interest so owing to him, or a deposit receipt of the new company for such balance, to bear interest at a slightly lower rate, and to be payable at the expiration of 10 years from the company's incorporation. It was required that the option conferred by this clause should be exercised by the colonial creditors within one calendar month, and by the British creditors within four calendar months from the incorporation of the new company by giving notice as therein prescribed. In default of such notice, creditors not having legal power to take preference shares were to be treated as having elected to take deposit receipts, and all other creditors having elected to take preference shares. Clause xiv. relates to the transfer of deposit receipts and the registration of the holders. From the few extracts briefly cited the main feature of the scheme of compromise appears to be that the new company should take to itself the benefit of all the assets and the burden of all the liabilities of the old. In fact, within four days after the formation of the new company, which was registered under the same name as the old on the 10th of August 1893, an agreement, a copy of which has been furnished to me, was executed, whereby the old company contracted to sell and the new company to purchase all the assets of the old company, a part of the consideration being the undertaking of the new company to discharge all the liabilities of the old in the manner provided by the scheme. Some difficulty is however occasioned by the form of the exception in clauses xii. and riii., "save as provided by clause xv." Clause xv. runs thus :"Every creditor of the old company not being a creditor holding a security over any portion of the assets of the old company shall accept the provisions made for him by clauses |