tried (s). It has been held that in no case will the Court appoint a manager of a railway or other company (†). Where bonds were issued payable to bearer, and the property of the company was vested in trustees to secure the bonds with interest, but the covenants were made with the trustees only, the bondholders were held not to be creditors of the company; they could only put the trustees in motion (u); otherwise where the covenants were made with the company (r). (16.) Priority of debentures. Debentures are prior to all judgments and general creditors, so fr as relates to property subject to the debentures (x); and if the Sale of under- undertaking is sold either under an Act of Parliament (x), or under taking. a winding up order (~), the debenture holders have a priority over all other creditors against the proceeds of sale, although their debts were incurred in carrying on the business (a). Merger by judgment. Priority of Judgment taken upon a debenture merges the security, so that interest at 4 per cent. only runs on the judgment (b), though the debenture carried 6 per cent. (c), unless there was an agreement that the judgment should only be a collateral security (d). Debenture holders have no claim on the balance from rates after they have been received (e). In a winding up, the liquidators' costs in carrying on the business are postponed to the debenture holders (a). By 30 & 31 Vict. c. 127, s. 23, the priority of mortgages and debenture holders against the company and their property over all other claims on account of any debts incurred or engagements entered into, after the 20th of August, 1867, has been declared; but this priority is not to affect any claim against the company in (s) Re Exmouth Docks Co. 17 Eq. 181, V. C. Malins; Herne Bay Waterworks Co. 10 Ch. D. 42, V. C. Malins. (t) Potts v. Warwick, &c. Co. Kay, 142; De Winton v. Mayor of Brecon, 26 Beav. 533; Gardner v. London, Chatham and Dover R. Co. 2 Ch. 201. But see Peck v. Trinsmaran Iron Co. 2 Ch. D. 115, Jessel, M. R., and 30 & 31 Vict. c. 127, s. 4; sup. p. 393. (u) Re Uruguay, &c. R. Co. 11 ib. 372, Jessel, M. R. (v) Olave Silver Mining Co. W. N. 1884-124, Pearson, J. (x) Ames v. Trustees of Birkenhead Docks, 20 Beav. 332; Furness v. Caterham, &c. Co. 27 Beav. 358. (z) Re Marine Mansions, &c. Co. 4 Eq. 601, V. C.. Wood; Panama, &c. Royal Mail Co. 5 Ch. 318; Hart v. Eastern, &c. R. Co. 7 Exc. 246; 8 Exc. 116; 17 Jur. 89. (a) Grissell's Case, 3 Ch. D. 411, C. A. (b) 1 & 2 Vict. c. 110, s. 17. (c) European Central R. Co. 4 Ch. D. 33, V. C. Bacon. (d) Re Agricultural Cattle Insurance Co. ib. 34, n. Jessel, M. R. (e) Swiney v. Enniskillen, &c. R. Co. 2 Ir. L. R. C. L. 338. respect of any rent charge under the Lands Cl. Acts of 1845 and 1860, or of any rent or sum payable under any lease to the company which is to rank in priority to, or pari passu with, the interest or dividends on the mortgages, bonds, and debenture stock, nor is any claim for land taken, used, or occupied by the company for the purposes of the railway, or injuriously affected by the construction thereof, or by the exercise of any of the powers conferred on the company to be affected. Debentures executed the same day follow priority according to the order in which they are executed, unless anything on their face shews another priority (ƒ). (17.) Register of mortgages and transfers. By the Comp. Cl. Cons. Act, 1845 (g), a register of mortgages and bonds is required to be kept with the particulars therein specified. And a company may refuse to register a mortgage if it does Statutory not follow the statutory form (h). form. mortgages 1862. By the Companies Act, 1862 (i), every limited company must Register of keep a register of all mortgages and charges affecting the property under Act of of the company, with such particulars thereof as in the Act specified, under a penalty not exceeding 50%. upon every director, manager, or other officer thereof. In addition to the penalty, it has been held, that an officer of the company who takes a mortgage from the company, and omits to register it, cannot avail himself of it (k); and a solicitor who took the mortgage, although not the solicitor of the company, was held to be an officer within the Act (k). But this was held not to apply where the directors who took the mortgages were guilty of no neglect, but the omission arose through the fault of the secretary (m); nor as against the transferee of a mortgage from a director (n); nor where the mortgage was made to a firm, of which only one was a director (o). Mortgagees, who are not officers of the company, do not lose their (f) Gartside v. Silkstone, &c. Co. 21 Ch. D. 762, Fry, J. (g) 8 & 9 Vict. c. 16, s. 45. (h) Reg. v. General Cemetery Co. 6 E. & B. 415. (i) 25 & 26 Vict. c. 89, s. 43. (k) Patent Bread Machinery Co. Valpy's Case, 7 Ch. 289; The Native Iron Ore C.-VOL. I. Co. 2 Ch. D. 345, C. A. (m) Borough of Hackney Newspaper Co. (n) The International, &c. Pulp Co. D D Register of mortgage under Act of 1862. Transfers. priority by the neglect of the officers (»); and if the unregistered mortgages have been realised, the amount cannot be directed to be refunded (o). The cases in which the mortgages of officers of the company have been postponed have not been based on the ground that such mortgages are void (p); and the principle of imposing an additional liability beyond the penalty is difficult to be understood (q), and not very satisfactory (r); but the point is settled. A shareholder is entitled, under s. 43 of the Companies Act, 1862, to inspect the register of mortgages (s). Transfers of mortgages and debentures are to be registered in manner directed by (†). The transferee must sue on the debentures in his own name (u); but the assignee of a Lloyd's bond must (before the Jud. Act) have sued in the name of the obligee, not in his own, it being a chose in action not assignable at law (x). Debenture bonds of a lunatic are transferable under 16 & 17 Vict. c. 70, s. 141 (y). (18.) Railway arrangement scheme. By the Railways Co.'s Act, 1867 (2), mortgagees and debenture holders of railway companies are bound by arrangement schemes, which have been adopted by majorities of each class after due advertisement in the manner pointed out in the Act. The scheme will be confirmed, unless the assent of the majority is obtained by fraud (a). Debenture holders who have taken judgment, cannot thereby be placed in a better position than the other debenture holders (b); although they have taken judgment, they are still debenture holders, and, as such, bound by the scheme (c). Judgment creditors, not being bound by the scheme, cannot derive (n) Re General S. American Co. 2 Ch. D. 337, C. A. (0) Borough of Hackney Newspaper Co. 3 ib. 669, Jessel, M. R. (p) Valpy's Case, 7 Ch. 289. (a) The International, &c. Pulp Co. Knowles' Mtg. 6 Ch. D. 556, Jessel, M. R. (r) Ib. Re New Globe Patent &c. Co. W. N. 1879-18, Jessel, M. R. (s) Re Credit Co. 11 Ch. D. 256, V. C. Hall. (t) 8 & 9 Vict. c. 16, s. 47. (u) Vertue v. E. Anglian R. Co. 5 Exc. 280; 19 L. J. Exc. 235. (x) Williams v. Sidmouth R. &c. Co. 2 L. R. Exc. 284; 36 L. J. Exc. 184; 15 W. R. 995; 16 L. T. N. S. 425. (y) Re Mitchell, 17 Ch. D. 515, C. A. (z) 30 & 31 Vict. c. 127. (a) Re E. & W. Junction R. Co. 8 Eq. 87, V. C. James. (b) Re Potteries Co. 5 Ch. 67; Potteries, &c. Co. v. Minor, 6 Ch. 621. (c) Potteries, &c. Co. v. Minor, sup. any benefit from its provisions (d). Thus mortgagees and vendors, who have accepted rent charges under the scheme in satisfaction of their mortgages and vendors' lien, do not lose their priority by merger as against such judgment creditors (d). Debentures and mortgages may be changed into debenture stock under a scheme (e). Landowners and outside creditors, whose assent is not required by the Act, are not bound by the scheme (ƒ); but the inrolment will be stayed at the instance of outside creditors who desire to have the petition reheard (g). The scheme may be amended by the Court, although the amendment may affect the priorities of debenture holders (h). (19.) Suspension clause in Arrangement Acts. In the arrangement schemes of railways and other Acts a suspension clause is often introduced, preventing the existing creditors from taking steps against the company during a limited period. It has been held that mortgagees who, under the Act, have been compelled to accept new debentures, with different rights and priorities, in satisfaction of their old debentures, are, notwithstanding, still "existing creditors" within the meaning of the suspension clause (i). Non-assenting creditors will not, during the suspense, obtain leave to sue without special circumstances (j). (20.) Compensation under Companies Acts. Compensation, under the Lands Clauses Act, for loss of profits and goodwill of mortgaged premises, belongs to the mortgagee (k). Where a company refused to treat with a mortgagee, the Court Lands Clauses stopped the works (7); and where the equitable mortgagee is not Act. served, his rights remain (m). (d) Stevens v. Mid Hants R. 8 Ch. 1064. (e) Re Irish N. W. Co. 2 Ir. Eq. 425. (f) Re Cambrian R. Scheme, 3 Ch. 278; E. & W. Junction R. Co. sup.; Munns v. Isle of Wight R. Co. 8 ib. 653, V. C. James; varied, 5 Ch. 414. (g) Devon and Somerset R. Co. 6 Eq. 615, V. C. Giffard. (h) Manchester and Milford Ry. Co. W. N. 1881-121, V. C. Hall. (i) London Financial Co. v. Wrexham, &c. Co. 18 Eq. 566, V. C. Malins. (j) Teign Valley Ry. W. N. 1881- (k) Pile v. P. 3 Ch. D. 36, C. A. (m) Martin v. London and Chatham, &c. Mortgage Burial ground. Income tax. If land is taken by a company and there is a doubt whether the persons in possession are mortgagees, the purchase money is invested and the dividends paid to the persons in possession without prejudice to any question or application (n). (21.) Mortgage Debenture Acts. By the Mortgage Debenture Act, 1865 (0), and the Mortgage Debenture Amendment Act, 1870 (p), companies which by their constitution are limited to the objects of advancing money on the securities upon land and other property in the Acts specified, are empowered to issue mortgage debentures in the form, and founded upon such securities and to be registered as in the Acts mentioned. (22.) General Matters. Notice of a mortgage of shares by assignment in blank is binding on a company (7). Registration of a mortgage of shares will not be enforced by mandamus (r). A mortgage on the future rates of the burial ground of two parishes is valid (s). And see further, Comp. Cl. Act, inf., p. 1247. Coupons on debentures payable abroad are liable to income tax (t). (n) Exp. Cork, 11 W. R. 1015. (0) 28 & 29 Vict. c. 78. (p) 33 & 34 Vict. c. 20. (a) Exp. Dobson, 6 Jur. 917, Ct. of Review. (r) Gen. Cemetery Co. 2 Jur. N. S. 972, Q. B. (s) Reg. v. Overseers of Coleshill, 9 ib. 226, Q. B. (t) Alexandria Water Co. v. Musgrave, 11 Q. B. D. 174, C. A. |