Neutral Citation Number [2011] EWHC 2318 (Ch)
Claim No. 1LS30408
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY

Leeds Combined Court Centre
Oxford Row
Leeds LS1 3BG

Date: 6th September 2011

Before:

His Honour Judge Keyser Q.C.
sitting as a Judge of the High Court

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Between:

ATIQUE REHMAN
Claimant

-and-

(1) MICHAEL CHAMBERLAIN
(as liquidator of meritmill (uk) limited)
(2) THE REGISTRAR OF COMPANIES
Defendants

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LOUIS DOYLE (instructed by Blacks Solicitors LLP of Wade House, The Merrion Centre, Leeds, LS2 8NG) for the Claimant
HUGO GROVES (instructed by Walker Morris of Kings Court, 12 King Street, Leeds, LS1 2HL) for the First Defendant

Hearing dates: 5th and 6th September 2011
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Judgment

H.H. Judge Keyser Q.C. :

Introduction
1.	Meritmill (UK) Limited (“the Company”) went into administration on 15th October 2009 and into creditors’ voluntary liquidation on 18th February 2010.  On the latter date Mr Michael Chamberlain was appointed as liquidator.  The claimant, Mr Atique Rehman, was and remains one of the creditors of the Company, having in February 2009 advanced to the Company £150,000 to supplement its working capital.  The Company gave security for that advance by way of various charges, including a floating charge, contained in a Debenture dated 27th February 2009.  The Debenture was duly registered at Companies House on 28th February 2009 pursuant to section 395 of the Companies Act 1985.
2.	Section 245 of the Insolvency Act 1986 provides, so far as material, as follows:
“(2) 	Subject as follows, a floating charge on the company's 
undertaking or property created at a relevant time is invalid except to the extent of the aggregate of—
(a) 	the value of so much of the consideration for the creation of the charge as consists of money paid, or goods or services supplied, to the company at the same time as, or after, the creation of the charge …

“(3) 	Subject to the next subsection, the time at which a floating charge is created by a company is a relevant time for the purposes of this section if the charge is created—
      …
(b) 	in the case of a charge which is created in favour of any other person, at a time in the period of 12 months ending with the onset of insolvency …

“(4) 	Where a company creates a floating charge at a time mentioned in subsection (3)(b) and the person in favour of whom the charge is created is not connected with the company, that time is not a relevant time for the purposes of this section unless the company—
(a) 	is at that time unable to pay its debts within the meaning of section 123 in Chapter VI of Part IV, or
(b) 	becomes unable to pay its debts within the meaning of that section in consequence of the transaction under which the charge is created.

“(5) 	For the purposes of subsection (3), the onset of insolvency is—
…
(d) 	in a case where this section applies by reason of a company going into liquidation, the date of the commencement of the winding up.”
 	It is common ground that in February 2009 the Company was unable to pay its debts.  On the basis of advice obtained from counsel, Mr Chamberlain (“the liquidator”) contended that the claimant’s floating charge was invalid by reason of section 245.  The claimant, however, challenged that contention and produced an opinion from leading counsel in support of his position.  
3.	Accordingly, by an application notice dated 17th March 2011 the liquidator applied to the Court for determination of the validity of the claimant’s floating charge and for directions.  On 8th June 2011 the application came for hearing before Mr Anthony Elleray Q.C. sitting as a deputy High Court judge.  Upon receiving undertakings from the claimant by his counsel to commence proceedings, he adjourned the application until today for hearing with the claimant’s proceedings.  Pursuant to his undertakings to the Court, on 15th June 2011 the claimant commenced Part 8 proceedings for various heads of relief, which I may summarise as follows.  First, he claims rectification of the register maintained by the Registrar of Companies so as to record the date of the Debenture as 12th February 2009 (the date when the money was advanced) and not 27th February 2009.  Second, and in the alternative, he claims a declaration that he and the Company had reached an agreement for the creation of security prior to the execution of the Debenture and that this prior agreement had created an equitable security (“the Earlier Security”), and an order extending the time for registration of the Earlier Security.  Third, and in the alternative, he claims declarations that when the money was advanced on 12th February 2009 it was held by the Company on a resulting or constructive trust for him until, upon the execution of the Debenture on 27th February 2009, it became held for the benefit of the Company, being advanced to the Company beneficially on that date.
4.	It is common ground that the liquidator’s application will effectively be determined by the outcome of Mr Rehman’s Part 8 claim.  This is my judgment upon the Part 8 claim.
5.	At the hearing of the Part 8 claim, Mr Doyle, counsel for the claimant, properly abandoned the third head of claim and accepted that no trust could be established.  He also indicated that he did not pursue the second head of claim because, although the Court has jurisdiction to extend the time for registration of a charge, its settled practice is not to do so when the company that granted the charge has already entered into liquidation: Victoria Housing Estates Ltd v Ashpurton Estates Ltd [1982] 3 All ER 665.  I shall say more about this second head of claim later in this judgment.
6.	There remains what I have called the first head of claim, which is found in paragraphs 1 and 2 of the Details of Claim on the Part 8 claim form, as follows:
1.	A declaration that the Claimant and the First Defendant (“the Company”) reached agreement as between themselves for the creation of security by the Company in favour of the Claimant in the terms of the debenture annexed to this Claim Form (dated 27th February 2009) (“the Debenture”) on 12th February 2009 upon the Claimant delivering to the Company a cheque in the sum of £150,000 which the Company banked on 12th February 2009 to the Company’s credit (“the £150,000”).
2.	Consequent upon the relief sought in 1 above, an Order pursuant to [section 404 of the Companies Act 1985] rectifying the register maintained by the Second Defendant (“the Registrar”) so as to record the date of the Debenture as 12th February 2009 and not 27th February 2009.
 
	The reference to section 404 of the Companies Act 1985 is by way of correction: the claim form refers to sections 1096 and 1097 of the Companies Act 2006, but it is common ground that by virtue of the date of the creation of the charge it is the 1985 Act that applies in this case.  See Companies Act 2006 (Commencement No. 8 Transitional Provisions and Savings) Order 2008, Schedule 2, paragraphs 82 and 107.

The Claim for Rectification of the Register
7.	Section 395 (1) of the Companies Act 1985 provided as follows:
 	“Subject to the provisions of this Chapter, a charge created by a company registered in England and Wales and being a charge to which this section applies is, so far as any security on the company's property or undertaking is conferred by the charge, void against the liquidator or administrator and any creditor of the company, unless the prescribed particulars of the charge together with the instrument (if any) by which the charge is created or evidenced, are delivered to or received by the registrar of companies for registration in the manner required by this Chapter within 21 days after the date of the charge's creation.”

	The list of charges to which section 395 (1) applied was set out in section 396 (1) and included:
“(f)	a floating charge on the company’s undertaking or property”.

	Section 401 required the registrar of companies to give a certificate of the registration of any registered charge and provided that the certificate was conclusive that the requirements of the Act relating to registration had been complied with.  

8.	Section 404 provided as follows:
“(1)  	The following applies if the court is satisfied that the omission to register a charge within the time required by this Chapter or that the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction was accidental, or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on other grounds it is just and equitable to grant relief.
“(2) 	The court may, on the application of the company or a person interested, and on such terms and conditions as seem to the court just and expedient, order that the time for registration shall be extended or, as the case may be, that the omission or mis-statement shall be rectified.”

	In Re M.I.G. Trust Ltd [1933] Ch 542, Lord Hanworth M.R. said of the corresponding provision in the Act then in force that it gave “the widest possible discretion to the Court in circumstances which need not show that the omission was accidental or due to inadvertence but which would be sufficient on other grounds to make it just and equitable to grant relief.”  In Re Braemar Investments Ltd (1988) 4 B.C.C. 366, Hoffmann J referred to that dictum and said:
	“These last words suggest that the underlying guide to the exercise of the discretion is whether for any reason, whether specified in the section or not, it would be just and equitable to grant relief.”

9.	It is the claimant’s case that the power of rectification conferred by section 404 of the 1985 Act can be exercised in this case so as to include on the register	 particulars of a floating charge created by agreement between him and the Company on or about 12th February 2009, slightly more than one year before the Company entered into liquidation.  To explain how the case is advanced it is necessary to consider the facts in some detail.

The Facts
10.	The Company was incorporated on 24th June 2008 and started trading shortly afterwards.  Its four directors were Mr Stephen Hubbard, Mr Charles Self, Mr Ian Jennings and Mr Angus Shaw.  By January 2009 the Company was in financial difficulties, owing at least in part to the default of one of its debtors, and was looking for an injection of working capital.
11.	The claimant is the elder brother of Shafiq Rehman (“Shafiq”).  Shafiq, who is the more business-minded of the brothers, had an interest—possibly a controlling interest—in a company called Multishades Ltd and in January 2009 was involved in ongoing discussions with the Company with a view to a possible merger.  Those discussions led to an agreement in principle that the claimant would put working capital into the Company by way of a loan to be secured by a debenture from the Company and personal guarantees from two of its directors.  The claimant’s evidence shows that the agreement was made with the Company by Shafiq as his agent, who reported to him regularly.  The claimant was not involved in any of the discussions; and, although he had some recollection that he had once met the directors of the Company, all negotiations concerning the loan were conducted by Shafiq.  Indeed, the tenor of the evidence before me was that the money to be advanced to the Company was family money, although the claimant as elder brother was treated as being the owner of the money.
12.	 On 23rd January 2009 Blacks Solicitors wrote to the claimant to thank him for his instructions to act on his behalf in connection with a proposed loan to the Company.  Both that letter and an email of the same date from a solicitor at the firm to Shafiq showed that the instructions had come through Shafiq and that he was the source of the solicitors’ information regarding the proposed transaction.  On the same day Blacks wrote on behalf of the claimant to Harold Stock & Co, the Company’s solicitors.  The letter read in part as follows:
	“We are instructed by our above named client in respect of his proposed loan of £150,000 to your client.  We await full instructions in respect of the terms of the loan, however we understand it is repayable over a 12 month period at an interest rate of 6%.
	“We understand that the security for the loan is being provided by way of debenture over all the assets and undertakings of the Company and by way of personal guarantees provided by Charles Self and Stephen Hubbard …
	“In respect of the proposed debenture over the Company, please confirm whether there are any restrictions on the Company providing the debenture as we note there are four existing charges registered over the Company.”
	It is common ground that the letter accurately set out the nature of the proposed transaction at that time.
13.	On 6th February 2009 Blacks produced the first drafts of the Loan Agreement, the Debenture and two personal guarantees and sent them by email to the Company’s solicitors.  The drafts underwent various alterations in the course of the following three weeks, and the precise sequence of the drafts is not entirely clear, but the substance of the Loan Agreement and the Debenture remained unaltered and for present purposes nothing turns on the details of such alterations as were made.  The email of 6th February enquired when Blacks might receive copies of the consents to the debenture from the Company’s prior chargees and a draft of the proposed board minutes approving the transaction.  
14.	On 7th February 2009 the Company’s solicitors sent to Blacks draft minutes of a board meeting.  That draft is the only documentation that has been produced in respect of board approval of the transaction.  In oral evidence before me, Mr Hubbard and Mr Jennings stated that on the advice of the Company’s solicitors a formal board meeting had taken place on 4th February for the purpose of passing a resolution to approve the transaction that had already been informally agreed.  They did not produce any documentation that would confirm the date of the meeting.  Mr Shaw confirmed that a board meeting had taken place, although he was unable to confirm the precise date of the meeting.  The draft minutes clearly do not record an actual meeting on 4th February 2009: they were produced as a draft for the purpose of prior approval of Blacks, and they record the consideration given by the board of directors to documentation that did not exist as at that date.
15.	The email traffic shows that in the second week of February the parties were eager to put the Company in funds as soon as possible.  On 9th February Shafiq sent to Mr Hubbard an email in the following terms:
	I realise that you are probably very stressed out today.
	I just wanted to keep you on the inside track.  I thought it might be a good idea if we can get the agreements agreed today and signed; then I could pass a cheque to Angus [Shaw] tomorrow.  (The bloody solicitors are adamant that money should not be changing hands without signed agreements!)
	Mr Hubbard replied as follows:
	We had one like that but he soon learned to conform—as always 90% of these things are on trust—we are prepared to say we guarantee you will get your money back with a bit of legal cover behind it not something that doesn’t allow us to breath (sic).
	By the same token we are directing new orders into MSL right now even without the merger signed—we are doing this because we trust in you and that it is the right thing for all going forward, as this is a short term loan.
	Paul Stock is awaiting the revised paperwork from your lawyers.
	Although the matter was not explored in evidence, I infer that the reference to MSL is probably to Shafiq’s company, Multishades Ltd.  
16.	A telephone attendance note dated 9th February 2009 shows that on that date Shafiq enquired of Blacks whether he could advance the money to the Company by means of a cheque rather than through Blacks’ client account.  This accords with the evidence of Mr Hubbard and Mr Jennings, which was to the effect that it had not originally been envisaged that the advance would be made by the delivery of a cheque.  On 10th February the claimant wrote a cheque in favour of the Company, though it was not delivered on that day.  On 11th February Shafiq and the Company informed their respective solicitors that the terms of the transaction had changed, in that Mr Self would no longer be providing a guarantee and Mr Hubbard would now be the sole guarantor.  On 12th February Shafiq delivered the cheque to the Company and it was presented for payment on that day.  
17.	As at 12th February 2009 the drafting of the documentation had not been finalised between the solicitors.  However, on 17th February 2009 Mr Paul Stock of the Company’s solicitors sent an email to his counterpart at Blacks as follows:
	As far as I am aware all of the documents are agreed …
	As far as I know the cheque has been given to my clients by yours.  If that is [the] case then you can date the documentation as soon as the cheque is encashed.
	At least one reason why the documentation was not executed and dated immediately appears to be that consents had still not been obtained from the prior charge-holders.  However, it appears that matters were ready to proceed by 20th February, when Nazia Ahmed of Blacks sent an email to Mr Stock as follows:
	I understand from my client that completion is to happen today.  My client will be signing the loan documentation today.
	Please can you confirm if you have instructions regarding completion today?
	At 10.11 p.m. that day Mr Stock replied:
	If the money/loan of £150k has been paid then that is in order.
 	On 23rd February 2009 Nazia Ahmed wrote by email to Mr Stock in the following terms:
	Please can you confirm if you hold the signed Loan Agreement, Debenture and Guarantee from your client.
	I will check with my client the date the cheque was cashed and I suggest we date loan documentation accordingly.  I will let you know of the date once I have spoken to my client.
18.	By 27th February the documents executed by the Company had been received by Blacks.  A telephone attendance note of that date reads in part as follows:
	NA [Nazia Ahmed] spoke to Shafiq Rehman.  NA informed SR that she has now received the signed docs and required SR/AR’s authority to date the documentation with today’s date.  SR confirmed docs can be dated with today’s date.
	NA said although the money [had] already been provided the date of the agreement should technically commence from the date the docs were executed.
	SR agreed and was fine about this.
	That morning Nazia Ahmed sent email to Paul Stock:
	I have today received the loan documentation.  Please can you arrange to send the signed board resolution of the Company approving the Loan and Debenture.
	I will date the documents with today’s date and I will deal with filing of the attached Form 395 at Companies House.	
	Mr Stock replied that afternoon:
	Yes you can date same and I will send the resolution when I am back in office next week.
19.	Accordingly the Debenture and the Loan Agreement were dated 27th February 2009.  Clause 3 of the Debenture created several charges in favour of the claimant: a legal mortgage over all land then owned by the Company; a fixed equitable charge over all land which the Company acquired in the future; fixed charges over numerous other specified assets, including goodwill and plant and equipment; and a floating charge over “all those Assets which are not for any reason effectively charged by this Debenture by way of fixed charges or mortgage”.  The terms on which the advance was made were contained in the Loan Agreement, clause 3.1 of which provided as follows:
	Before the Loan may be drawn down by the Borrower from the Lender pursuant to the terms of this agreement, the Borrower shall deliver to the Lender in the form and substance satisfactory to the Lender all of the following:
3.1.1	certified copies of Resolutions of the Board of Directors of the Borrower approving the transactions contemplated by this agreement and authorising a specified person or persons to execute this agreement on behalf of the Borrower, together with specimen signatures of each such person or persons; and
3.1.2	the Security Documents [namely, the Debenture and the personal guarantee] duly executed by each of the parties thereto in favour of the Lender. 
20.	Under cover of a letter dated 27th February 2009 Blacks sent to the Registrar of Companies the Debenture and a completed Form No. 395, which showed the date of the creation of the charge as 27th February 2009.  On 5th March 2009 the Registrar of Companies gave a certificate of the registration on 28th February 2009 of a debenture dated 27th February 2009.
21.	The remaining chronology may be taken briefly.  On 9th March 2009 Blacks sent to the Company’s solicitors the draft board minutes that had previously been provided to them on 7th February; it may be that the Company’s solicitors had been unable to find a copy, but it does not appear that they subsequently provided a signed minute of a board meeting at which a resolution to approve the grant of the debenture had been passed.  Accordingly neither of the preconditions to the making of the advance specified in clause 3.1 of the Loan Agreement was complied with.  In May 2009 Shafiq Rehman was appointed as a director of the Company.  Thereafter, as I have said, the Company went into administration on 15th October 2009 and went into liquidation on 18th February 2010.  The claimant brought proceedings against Mr Hubbard on the latter’s personal guarantee and obtained summary judgment against him under Part 24.  That judgment remains unsatisfied and attempts to enforce it have not proceeded beyond oral examinations; Mr Hubbard’s fate is bound up with the fate of these proceedings.

The Claimant’s Contentions
22.	In the course of argument, Mr Doyle developed an argument that I may summarise as follows.  The floating charge created by the Debenture is invalidated by section 245 of the Insolvency Act 1986.  However, that document reflected an agreement that had been finalised informally by the date when the claimant advanced the moneys to the Company, namely 12th February 2009.  Although the prior agreement was intended to be put into the form of a legal document by the execution of the Debenture, it was understood by the parties to give to the claimant, and was treated by them as giving to him, immediate security upon the advance of the moneys; it was not merely a case of understanding that he would at a future date be given security.  Accordingly there were in fact two distinct securities: first, the equitable security, said to comprise a floating charge, given by the prior informal agreement; second, the security granted by the Debenture, comprising both a floating charge and a number of fixed charges.  Only the second security had been registered under section 395.  But to the extent that the registration related to the floating charge it did no more than reflect the earlier charge given informally on 12th February 2009.  The wide jurisdiction to rectify the register under section 404 was apt to cover such a case, by permitting rectification of the register to record the earlier equitable charge in place of the charges created by the Debenture.  This would not cause genuine prejudice to third parties: the importance of registration is that it places potential creditors of a company on notice of charges over the company’s assets, and the registration of the Debenture was sufficient to give to such potential creditors full notice of the security interest now being asserted by the claimant.
23.	The particular legal basis of that argument may be taken conveniently from the judgment of Sir Christopher Slade in Re Shoe Lace Ltd, Power v Sharp Investments Ltd [1993] BCC 609.  A debenture was executed on 24th July 1990.  The Court of Appeal upheld the decision of Hoffmann J that moneys which had previously been advanced by the chargee in anticipation of and in consideration for the debenture, including an advance made on 16th July 1990, had not been made “at the same time as” the creation of the charge for the purposes of section 245 (2) of the Insolvency Act 1986.  At 619 Sir Christopher Slade expressed his conclusion as follows:
 	“The words “at the time of or subsequently to the creation of … the charge” in sec. 212 of the 1908 Act (just as the words “at the same time as, or after, the creation of the charge” in sec. 245 of the 1986 Act) were clearly included by the legislature for the purpose of excluding from the exemption the amount of moneys paid to the company before the creation of the charge, even though they were paid in consideration for the charge; on any other construction these words would have been mere surplusage.”
	It is this conclusion that prevents the claimant from contending that the advance of £150,000 on 12th February 2009 was made “at the same time as” the execution of the Debenture on 27th February 2009 and that leads Mr Doyle to contend that it was made “at the same time as” the creation of an earlier, informal charge.  As to the creation of such an earlier charge, Mr Doyle relies on this passage from Sir Christopher Slade’s judgment at 615:
 	“In Re Jackson & Bassford Ltd [1906] 2 Ch 467 , Buckley J (at p. 477) drew an important distinction between two classes of case, namely, 
 	(1) 	an agreement to give security which was “so expressed as to create a present equitable right to a security” and was thus registrable; and
	(2) 	an agreement to give security which was so expressed as to be “merely an agreement that in some future circumstances a security shall in the future be created” (which would not require registration). 
 	As to class (1), it should be observed that in equity a floating charge is created by a contract evidenced in writing and for valuable consideration to execute, when required, a formal mortgage by way of floating charge (see Halsbury's Laws of England (4th ed.) vol. 32, para. 437 and 439). If the floating charge relates to a limited company's property or undertaking, it is registrable.”
24.	The particular factual basis of Mr Doyle’s argument is the contention that the evidence of the claimant and the witnesses from the Company shows that the true nature of the agreement was that the claimant was to enjoy security for the debt owed to him from the moment when he made his advance.  This evidence appears most clearly in the claimant’s witness statement dated 6th June 2011, where he stated:
	“At the time of my delivering the £150,000 by way of cheque to the Company I had absolutely no doubt whatsoever that that was on the basis that, by agreement with the Company, or at least by way of a common understanding with it, I would be treated as secured in the same way as I would have been under the executed Debenture upon the payment being made, with the executed Debenture being regarded by me (and, I believe, the Company) as formalising matters in terms of the paperwork.  I can say categorically, and perhaps not surprisingly given the amount involved, that I would never have handed over the cheque representing the £150,000 if I had thought that the position was any different.”
 	“I can say with absolute confidence that upon delivery of the cheque for the £150,000 I was absolutely clear in my mind, as I believe was the Company, that between us there was an agreement that I would be treated as a secured creditor fro the £150,000 pending execution of the Debenture which, again, was viewed very much as a formality without detracting from the substance of the agreement to which I have referred.”
	To similar effect is Mr Hubbard’s witness statement, also dated 6th June 2011:
	“The common intention and understanding as between the Company and Mr Rehman at the time he delivered the £150,000 cheque to the Company on 12th February 2009 was without any doubt that he would be regarded by the Company as being secured in precisely the same way as it was envisaged he would be secured by way of the Debenture subsequently executed on 27th February 2009.  As guarantor for the Company’s liabilities, I can also say without hesitation that I would never have agreed to the Company taking the £150,000 from Mr Rehman in the absence of what I say was the common understanding between us as to his having immediate security over the assets of the Company pending formal execution of the Debenture which in any event, as at 12th February 2009, was more or less agreed save for minor but insignificant points.”
	In his statement dated 13th July 2011 Mr Jennings, who was both a director and the secretary of the Company, stated:
	“I have to say that although the Debenture had not been formally executed at the time the cheque was handed over to the Company on the 12th February, there was a clear understanding between Mr Rehman and the Company that as soon as he handed over the £150,000 to the Company he was being granted immediate security over the Company’s assets pending the formal execution of the Debenture.”
	“The agreement with Mr Rehman was that he was to have immediate security at the point he delivered the loan monies to the Company and it was equally understood by the relevant individuals that in the event Mr Rehman was not provided with the requisite ‘comfort’ then, and if required, Mr Rehman’s money would have to be returned, especially bearing in mind that one of the Directors, Stephen Hubbard, had given a personal guarantee which we understood would be immediately enforceable in the event that Mr Rehman did not receive the comfort that we understood he had received on payment of the loan monies.”
	Mr Doyle submits that, in the light of this evidence, which he contends was substantially confirmed in the course of cross-examination before me, the case falls within class (1) as identified by Buckley J in Re Jackson & Bassford Ltd.  When the money was advanced on 12th February 2009, there was an agreement that the claimant should immediately enjoy security in the nature of a floating charge over the Company’s assets.  That agreement was evidenced by the letter from Blacks to the Company’s solicitors on 23rd January 2009 (paragraph 12 above), by the minutes of the board meeting on 4th February 2009 and by the travelling drafts of the Debenture in broadly similar form from 6th February 2009 until execution three weeks later.

Discussion and Conclusions
25.	For the reasons set out below, I dismiss the application for rectification of the register of charges.  In summary: I do not consider that the evidence supports the factual premise of the claim, namely that the claimant had a security interest at the time when he advanced the money on 12th February 2009; and, even if I considered that such a security interest existed, I should not consider it appropriate to exercise the discretion under section 404 in the claimant’s favour.
26.	Regarding the evidence and the factual case, I make three preliminary observations.  First, although the written evidence in the witness statements must be given due weight, it is necessary to be alert to the risk that the formulation of that evidence is crafted, however innocently, to the perceived demands of the case being advanced.  In attempting to ascertain the true position in February 2009, I have found myself more assisted by the oral evidence presented at the trial and by a consideration of the limited documentation and the limitations of that documentation.  Second, the witness evidence in the case tended to address matters of subjective personal understanding or assumption, or even of retrospective projection, rather than issues concerning the objective agreement that was made.  In particular, there was a tendency for witnesses to treat the obvious fact that the advance was intended to be secured as though it necessarily implied the immediate existence of security upon the making of the advance, thereby ignoring the situation mentioned by Sir Christopher Slade in Re Shoe Lace Ltd in the passage set out at paragraph 23 above, namely payment in advance of and in consideration for a charge yet to be granted.  This leads to the third preliminary observation.  The first class of case identified by Buckley J is an agreement to give security which is “so expressed as to create a present equitable right to security”.  In my judgment the words “so expressed” are to be given proper weight and are not mere verbiage.  I do not mean to say that any unusual rule for contract formation applies to this class of case, or that a precise verbal expression will always have to be given to the agreement for immediate security.  However, in reaching a decision as to what the agreement between the parties was, the court must look at what they objectively said and did—at how they expressed themselves, whether by word or deed.  
27.	Having carefully considered all of the evidence, both written and oral, I find that the agreement between the claimant and the Company fell squarely within the second class of case identified by Buckley J in Re Jackson & Bassford Ltd; that is to say, it was an agreement that security would be created but was not an agreement so expressed as to create a present equitable right to a security.
28.	The claimant was at pains to say in oral evidence that he understood the loan to be secured from the moment it was made.  He made the point repeatedly, whether or not it was strictly relevant to the question he was supposed to be answering.  However, he had no involvement in the negotiations for the loan or the security and had no relevant communication with the Company.  All of the communications were between the directors and Shafiq.  There was no evidence from Shafiq.  The claimant himself appeared to have a very tenuous grasp of affairs relating to the transaction and the Company.  He knew that Mr Hubbard had given him a personal guarantee and was able to confirm that he had brought proceedings against Mr Hubbard on that guarantee; but he did not know what had happened in those proceedings.  Regarding the loan, his evidence was that Shafiq had told him that the Company wanted to borrow money and had told him the amount being sought.  The claimant said that he made the loan because he wanted to help the Company.  He did not know how it came about that Shafiq subsequently became a director of the Company.  He left it to Shafiq to give instructions to Blacks.  I am satisfied that the claimant knew that the loan was to be secured by a debenture, but I am not persuaded that he had any belief that a security would exist as soon as the cheque was paid.  I find that he gave the cheque in consideration for the debenture that was to be executed.  He was unable, of course, to give evidence of any contrary agreement.
29.	The evidence from the directors of and the solicitor for the Company did not in my judgment establish any agreement for an immediate security upon the giving of the cheque.  Nor in my view did it lend much support to the contention that those persons subjectively believed there to be such security.  The evidence in particular of Mr Hubbard, who dealt mainly with the transaction for the Company, makes it clear that the Company had not envisaged receiving the advance by way of a personal cheque.  When his evidence was tested in cross-examination, he did not suggest that there had been any discussions or agreements for a security other than the debenture.  He accepted that he had never told the Company’s solicitors that any security had been created prior to the execution of the Debenture, and he confirmed in terms that so far as he was concerned the security was always to be the Debenture.  Similarly, Mr Jennings confirmed that the security was always to be provided by the Debenture and that there had been no discussion among the directors of the significance of any interval of time between the advance of the money and the execution of the Debenture.  His oral evidence did not confirm the understanding regarding immediate security set out in his witness statement; far less did it establish any agreement for such immediate security.  Mr Shaw was not involved in the negotiations for the loan or the security.  Similarly, Mr Paul Stock was not involved in any discussion or agreement for an immediate security, and his evidence that he believed there to have been such immediate security appears to be simply a matter of his own interpretation.  In fact, Mr Stock’s witness statement dated 19th April 2011, made in respect of the liquidator’s application, had stated:
	“It was my understanding that the cheque was advanced under the terms of the Loan Agreement so that if, for instance, the Company had failed to execute the Debenture and failed to execute the Loan Agreement the funds so advanced would be repayable immediately to the Respondent [i.e. Mr Atique Rehman].”
	While that evidence does not perhaps formally contradict an assertion of the existence of a prior informal security, it at least sits uneasily with such an assertion.  Of course, as the liquidator has observed in these proceedings, the assertion of the existence of a prior informal security was not being made in April 2011 or at any time until the first week of June 2011, a few days before the liquidator’s application was due to be heard.
30.	Accordingly, I find that the circumstances of this case fall within the second class identified by Buckley J in Re Jackson & Bassford Ltd.  The money was given in anticipation of and in consideration for the security that was to be given by the Debenture.  That was perhaps imprudent but it was not in any way implausible and is no doubt to be explained by the fact that the Company, in which Shafiq was intending to become interested, was in urgent need of the money and that no one doubted that the Debenture would be executed within days.  The matter proceeded on the basis of trust and pragmatism, as such matters often do.
31.	My finding of fact as to the nature of the agreement is sufficient to dispose of the claim.  However, even if I had made a different finding of fact I should not have been willing to exercise my discretion under section 404 of the Companies Act 1985 in favour of the claimant.
32.	The argument for the claimant involves asserting the existence of two security agreements: an informal security agreement on or about 12th February 2009, an a formal security agreement in the Debenture on 27th February 2009.  The latter was registered but the former was not.  Accordingly what is being sought under section 404 is in substance—and I should say, in form also—an extension of time to register the informal security agreement, albeit only in place of the security agreement contained in the Debenture: the security agreement that is proposed to be registered is not at present defectively registered, it is not registered at all.  As I have previously noted, at the outset of the trial Mr Doyle had abandoned a claim for extension of time, on the ground that there were no exceptional circumstances such as would justify such an order.
33.	In Victoria Housing Estates Ltd v Ashpurton Estates Ltd [1982 3 All ER 665 the Court of Appeal held that its earlier decision in Re Resinoid and Mica Products Ltd (1967), now reported at [1982] 3 All ER 677, was authority for the proposition that an order extending time for registration of a charge will not normally be made after a company has gone into liquidation, although it did not lay down an absolute rule that “an exceptional case could not exist where it was justifiable to extend the time for registration after the commencing of winding up, e.g. where fraud exists.”  At 670 – 671 the Court explained the rationale of the general rule as follows:
“Ever since [the decision of Buckley J in  Re Joplin Brewery Co Ltd [1902] 1 Ch 79] it has been the practice to insert in an order extending the time for registration some such words as: ‘but that this order be without prejudice to the rights of parties acquired prior to the time when the debentures shall be actually registered.’ The reason for the proviso is as valid today as it was then. Such an application would be made either ex parte by the chargor company, which had the statutory duty to register, or by the chargee, in which case the company would be joined as the only respondent, if there were any respondent at all.  It was not the practice to advertise for creditors and to make one of them a respondent. Consequently, it was necessary to protect persons whose rights would otherwise be overridden in their absence…
 	“It soon became established that, so long as the company was a going concern at the date of registration, the proviso did not protect, and was not intended to protect, an unsecured creditor who had lent money at a time when the charge should have been but was not registered … The reason for this was that such unsecured creditor could not have intervened to prevent payment being made to the lender whose charge was not registered (whom we will call ‘the unregistered chargee’). Nor could such unsecured creditor have prevented the creation of a new charge, duly registered, to take the place of the unregistered charge. The proviso was intended to protect only rights acquired against, or affecting, the property comprised in the unregistered charge, in the intervening period between the date of the creation of the unregistered charge and the registration of such charge. Such persons would include a subsequent chargee of the relevant property, a creditor who has levied execution against the relevant property, and an unsecured creditor if, but only if, the company has gone into liquidation before registration is effected. Once the company has gone into liquidation, the existing unsecured creditors are interested in all the assets of the company, since the liquidator is bound by statute to distribute the net proceeds pari passu among the unsecured creditors, subject to preferential debts. The assets of the company are at that stage vested in the company for the benefit of its creditors. The unsecured creditors are in the nature of cestuis que trust with beneficial interests extending to all the company’s property.
 	“It follows from this approach that the court must invariably refuse to extend the time for registration once the company has gone into liquidation. If an order extending time were made and the proviso included, registration would be of no assistance whatever to the unregistered chargee because the unsecured creditors at that stage would be protected by the proviso. Such an order after liquidation would be futile and will be refused …
 	“The position accordingly became firmly established that the court (i) invariably adds to an order extending time the proviso which we have mentioned and (ii) will not make an order once liquidation has supervened, because the effect of the proviso would be to render the order futile. This is a matter of discretion and not of law.  It is possible to imagine a case, for example where fraud is involved, in which the court might extend the time for registration after the commencement of liquidation and omit the proviso which would render the order futile; we do not know of such a case in practice, and certainly the instant case does not fall into the category of fraud.”
34.	In closing submissions, as an alternative way of putting the claimant’s case, Mr Doyle revived the claim for an extension of time for the registration of the prior informal charge.  He submitted that the nature of the security interest created by the informal agreement on or around 12th February 2009 was a floating charge over the Company’s assets and that, in circumstances where such a charge was comprised in the Debenture and where the Debenture was registered within the period during which the prior informal charge was required to be registered, no injustice would be done to unsecured creditors in the winding up.  Accordingly, he submitted, there were exceptional circumstances justifying the unusual course of extending the time for registration after winding up had commenced.
35.	I reject that submission.  An initial, though not perhaps insuperable, difficulty lies in identifying the security interest to be registered.  Mr Doyle accepted that the informal agreement for which he was contending could not comprise fixed legal charges over land, and he did not contend that it included any other form of fixed charge.  It therefore was not co-extensive with the security to be granted by the Debenture.  The rectification sought in the Details of Claim in the claim form is clearly inappropriate, because on no view was the date of the Debenture 12th February 2009.  As regards a reformulation of the proposed rectification, there is in my judgment a degree of artificiality in trying to define the scope of the charge, in the absence of any clear evidence as to an agreement for such a charge.
36.	More importantly, I do not accept that it would be appropriate to extend the time for registration, even if the nature of the charge were to be identified with precision.  Mr Doyle is correct in saying that to register a floating charge to similar effect to that which was contained in the Debenture would not make a material difference to the terms of the registered charge.  But it remains the case that the floating charge in the Debenture is invalid by reason of section 245 of the Insolvency Act 1986 and that unsecured creditors now stand in the position of “cestuis que trust with beneficial interests extending to all the company’s property” (see above).  To extend the time for registration would have the effect of divesting those creditors of those proprietary interests.  The fact that this would leave them in no worse position than they would be in if the properly registered Debenture were valid rather than invalid does not answer the point that they would be placed in a worse position than they would be in if a currently invalid charge were (in effect) validated.  There is in this case no question of the creditors whose accrued interests would be affected having been tainted by fraud or any form of misconduct.  The most that can be said is that their accrued interests are in the nature of a piece of good fortune, resulting from the complexities and technicalities of the registration and insolvency provisions of the 1985 and the 2006 Acts.  However, the statutory provisions establish strict, but by no means unfair or unworkable, provisions with which those who would have the benefits of security interests, thereby taking their entitlements outside the pari passu scheme applicable to others, must comply.  The sometimes hard results of the operation of the statutory provisions are shown, in a different context, by Re Shoe Lace Ltd.  In the present case, if contrary to my findings the claimant did indeed have an informal security agreement prior to the execution of the Debenture, it created a registrable security interest and he did not register it.  In the result it is invalid in the liquidation.
37.	It is unnecessary for me to reach any decision as to whether, in the light of the dictum of Sir Christopher Slade in Re Shoe Lace Ltd, a class (1) agreement is required to be evidenced in writing and, if it is so required, whether there was sufficient written evidence in the present case.
38.	For the reasons I have given, the claimant’s claim fails.  I shall invite submissions as to the effect that this outcome has on the liquidator’s application for directions.