Barclays Bank Plc v Stuart Landon Ltd & Anor

On an application under section 404 of the Companies Act 1985, the court may extend time for registration of a company charge where the statutory grounds are satisfied, subject to a proviso protecting persons who may be prejudiced in a later winding up.

The imminent possibility of winding up is relevant, but it does not by itself justify refusing relief. Before winding up, unsecured creditors have no vested rights in the company’s property. The decisive question is whether a subsequent application to set aside the extension order would be bound to succeed. If that cannot be shown, the proper course is to grant the extension with the usual protective proviso.

Stuart Landon Limited created charges in favour of Barclays Bank Plc and John Purrier Griffiths. Barclays’ charge was contractually prior to Griffiths’ charge but was not registered within the statutory period.

A district judge initially granted Barclays permission under section 404 of the Companies Act 1985, subject to the usual proviso protecting creditors and shareholders in a winding up. On Griffiths’ application, the district judge set that order aside, principally because winding up appeared imminent and a later challenge by a liquidator was likely.

Barclays appealed. The central issue was whether the prospect of winding up justified refusing relief before winding up had commenced.

1. Appeal allowed. The order setting aside the extension order was reversed. The original order was restored, with a variation clarifying that the proviso did not affect the contractual priority between Barclays and Griffiths. Costs were awarded to Barclays.
2. Section 404 of the Companies Act 1985 confers a discretion to extend time where the failure to register was accidental or caused by inadvertence, subject to such terms as are just and expedient. The original order properly recognised the inadvertent failure and protected potentially prejudiced persons through the usual proviso.
3. The possibility that winding up is imminent is a relevant factor. It reflects the settled practice that an extension is not ordinarily granted after winding up has commenced, when unsecured creditors’ interests in the company’s property have vested under the insolvency code.
4. Before winding up, however, unsecured creditors have no vested rights in the company’s property. The possibility that a later registration may prejudice them does not require refusal of relief. The proviso protects persons who can subsequently demonstrate prejudice or establish that the statutory conditions for relief were not met.
5. The district judge misdirected himself by treating the likely success of a future challenge as depriving the present order of practical benefit. The relevant question was whether any later application to set aside the order would be bound to succeed. Mere likelihood that such an application would be made was insufficient.
6. The circumstances differed materially from In re Ashpurton Estates Ltd. In that case, the evidence and procedural circumstances justified refusing relief after liquidation. Here, the company was not in winding up, the original failure was accepted as inadvertent, and the protective proviso remained available.

• Court of Appeal (Civil Division): Appeal allowed; the order of 27 April 2000 was set aside and the earlier order of 21 February 2000 restored, subject to clarification of the contractual priority.
• Chancery Division, Birmingham District Registry: On 27 April 2000, the district judge set aside the earlier order granting Barclays permission to register its charge out of time.
• Earlier district judge order: On 21 February 2000, permission to register out of time was granted subject to the usual protective proviso.