rule had become "purely technical :" Per Blackburn, J., Rule at law. Crouch v. Credit Foncier, L. R. 8 Q. B. 380; Dicey, Parties

to Actions, 71.

There was no such rule in the Court of Chancery; there the In equity. assignee could sue in his own name.

Nevertheless it was well settled that the Court would not entertain a suit for the recovery of a legal chose in action, unless there were special circumstances; and the plaintiff was therefore, in most cases, obliged to sue at law. Thus, in the case of Hammond v. Messenger, 9 Simon, 332, the plaintiff was suing in equity for payment of a debt due from the defendant Messenger to the defendants Wilks and Wooler and assigned to the plaintiff. It was held, on demurrer, that the assignee of a debt could not sue for it in a court of equity, unless the assignor refused to allow the assignee to sue for it, at law, in his name, or had done or intended to do some act which would prevent the assignee from recovering it at law in the assignor's name: liberty to amend, however, was given. The ViceChancellor said: "If bills of this kind were allowable, it is obvious that they would be pretty frequent; but I never remember any instance of such a bill as this being filed unaccompanied by special circumstances." See Tudor's L. C., Vol. II., 780.

The rules of equity are now to prevail, and a plaintiff is expressly empowered to sue in respect of an equitable right, Judicature Act, 1873, Section 24, Sub-section (1.) It would therefore seem that henceforth, in any Division of the High Court, the holder of a debenture will, as assignee of the contract contained in it, be entitled to sue the company liable on it in his own name. And it is submitted that Sub-section 6 of Section 25 of the Act cannot be construed so as to deprive him, by implication, of this right.

In reference to the above, it will be borne in mind that the transferee of a debenture purporting to be payable to bearer must, though no assignment in writing be made to him, in any view, be taken to be equitable assignee of the contract or of the monies secured by the instrument. In re Agra and Masterman's Bank, 2 Ch. 397; In re Blakely Ordnance Co., 3 Ch. 158.

But in truth a company is rarely sued on its debentures. If Companies rarely st it fails to pay them at maturity, or to meet the interest in due debent

D D

Note.

course, the debenture holder, if he cannot otherwise get paid, usually presents a petition to wind-up the company.

From what has been said, it appears that a debenture under seal can be so framed that many of the most valuable incidents of a negotiable instrument will be annexed to it.

Whether deAs to whether a debenture to bearer, under seal or otherbenture to bearer may wise, may not be held to have become a negotiable instrument not be held by the Law Merchant, see Goodwin v. Robarts, L. R. 10 Ex. negotiable by 337; law merchant. S. C. 1 App. Cas. 476, and Crouch v. Credit Foncier, L. R. 8 Q. B. 382.

Two kinds.

Trust deed.

Advantages of trust deed.

MORTGAGE DEBENTURES.

There are two kinds of mortgage debentures. (a) Debentures secured by a trust or covering deed. See 4th Schedule to Form 10, infra, p. 440. (b) Debentures containing a charge upon the property of the company. See Forms 7 and 8, infra, pp. 435, 437.

The trust or covering deed above referred to usually contains a conveyance or assignment to trustees of all or some part of the company's property upon trust to permit the company to carry on its business therewith until default is made in payment of some principal or interest due to a debenture holder, and then to enter and sell the property, and out of the net proceeds to pay off the debentures and hold the surplus, if any, in trust for the company. The deed generally contains power for the trustees, after entry and till sale, to carry on the business of the company and divers other powers and provisions for the benefit of the debenture holders. See infra, Form 10.

Debentures secured by a trust deed have some advantages over those not so secured; for, of course, the trustees having the legal title to the property can in case of default enter and sell, &c., without seeking the aid of the Court, whereas the only mode of enforcing the charge contained in a debenture not secured by a trust deed is by action.

Nevertheless the trustees of such a deed seldom like to accept the responsibility of exercising their power of entry and sale, &c., except under the direction of the Court, and if occasion arises for the exercise of such powers the usual course is either for the trustees or for a debenture holder to bring an action for the execution of the trusts of the deed. A

receiver, and if necessary a manager, is in due course appointed in the action, and the property sold or otherwise dealt with as the Court directs.

abroad.

A trust deed is particularly necessary where debentures are As to real proto be charged upon real property situate abroad, for the right perty situate to the possession of land must be determined by the lex situs. The property should therefore be duly vested in trustees for the debenture holders according to the lex situs. To effect this it will generally be found necessary to execute (a) a transfer of the property to the trustees, which will have to be sent abroad for registration, &c., and (b) a trust deed reciting the transfer and declaring the trusts.

If this course is not pursued the debenture holder, upon seeking to enforce his charge, may find that it is not recognised by the lex situs, and, further, that some subsequent purchaser or mortgagee of the company has acquired a good title to the property according to that law.

So too where ships are to be included in the security a trust As to ships. deed is necessary, unless the company is to be entitled to sell its vessels at discretion.

The ships should either be transferred absolutely to the trustees, 17 & 18 Vict. c. 104, s. 55, or they may be mortgaged to the trustees for a definite sum, Section 66. In either case the instrument of transfer or mortgage must be in the statutory form duly recorded; there will be a separate deed containing a declaration of trust by the trustees.

not essential.

It was, indeed, at one time thought that, unless property of Trust deed the company was vested in trustees to secure the debentures, it was impossible to give the holders any preference or priority over the ordinary unsecured creditors in case the company came to be wound up. Lathom Brown, 26. And in this view it was, of course, essential to have a trust deed when the debentures were to be specifically secured on the company's property; but it has now been settled that a debenture containing a charge on the company's property is effectual, and the necessity in all cases of a mortgage to trustees therefore no longer exists.

The following are some of the leading cases as to the effect

of debentures containing a charge on property :

In re Marine Mansions Co., 4 Eq. 601 (decided July, 1867), Marine the company had issued debentures, each of which contained Mansions Co.

a clause by which the company pledged "the property belonging

Panama, &c., Co.

to us for the time being during the subsistence of the said debenture, with all the buildings and stock on and connected with our said property, and all the receipts and revenues to arise therefrom," and a declaration that the entire debenture, loan, and interest thereon should be and remain a first charge "on our undertaking and property, and receipts and revenues aforesaid."

The company was ordered to be wound up, and it was held by Page-Wood, V.-C., that the effect of the debentures was to give the holders a charge in priority to other creditors, upon the land and other property of the company.

So too in In re Panama, &c., Co. Limited, 5 Ch. 318 (decided Feb., 1870), debentures had been issued, charging the "undertaking and all sums of money arising therefrom," with the repayment at a specified time of the money borrowed with interest in the meantime. The company was wound up before the debentures became due. It was held by Giffard, L.J., affirming the decision of Malins, V.-C., that the debenture holders acquired a charge upon all the property of the company, past and future, by the word "undertaking," and that they were entitled to be paid out of the property of the company in priority to the general creditors. His Lordship said that he took the object and meaning of the debenture to be this, "that the word 'undertaking' necessarily infers that the company will go on, and that the debenture holder could not interfere until either the interest which was due was unpaid, or until the period had arrived for the payment of his principal, and that principal was unpaid. I think the meaning and object. of the security was this, that the company might go on during that interval, and, furthermore, that during the interval the debenture holder would not be entitled to any account of mesne profits, or of any dealing with the property of the company in the ordinary course of carrying on their business. I do not refer to such things as sales or mortgages of property, but to the ordinary application of funds which came into the hands of the company in the usual course of business. I see no difficulty in giving that effect to this instrument. But the moment the company comes to be wound up, and the property has to be realised, that moment the rights of these parties, beyond all question attach. My opinion is, that even if the company had not stopped, the debenture holders might have filed a

bill to realise their security. I hold that under these debentures they have a charge upon all property of the company, past and future, by the term undertaking, and that they stand in a position superior to that of the general creditors, who can touch nothing until they are paid." See also In re Regent's Canal Iron Works Co., ex parte Grissell, 3 Ch. Div. 411.

The last case which need be cited is In re The General General South American Co. South American Co., Limited, 2 Ch. Div. 337 (decided March, 1876). In that case the company, which was formed for carrying on the business of general merchants between Europe and America by way of commission or otherwise, had issued debentures each of which purported to mortgage and charge all the property, book-debts, credits, assets, monies and other effects, of which the company was then possessed or entitled, or should at any time thereafter become possessed or entitled, with the payment of the sum of 1007. and interest as therein mentioned.

Certain conditions were indorsed on each debenture providing that the debentures, to the amount of 130,0007, intended to be issued, should rank pari passu, and that "notwithstanding the within written debenture and the security thereby created, the said company and the directors thereof shall be at liberty to continue to employ and use the present and future property, book-debts, &c., of the said company, or the proceeds thereof, or such parts thereof as they may, from time to time, consider necessary for the purpose of continuing and carrying on the business of the company, and meeting and paying the debts, liabilities and engagements of the company, without any liability for so doing to the holder of the within written debenture until default in payment of any principal or interest money within secured, or unless and until . . . . any petition shall be presented for winding up the said company, upon which any order shall be made for the winding up of the same." Provided that on the happening of any of the said events the authority thereby given should determine, and the charge become immediately enforceable.

The company was ordered to be wound up by the Court, and the debenture holders claimed priority over the general creditors. The question was raised upon a summons by the debenture holders for a declaration that they were entitled to a charge on the assets in priority to the general creditors and for