TMI Blog1966 (5) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... a letter of authority in the standard E.C.G. form, with certain variations, authorising E.C.G. to pay direct to the first defendant, Discount Bank (Overseas) Ltd. (hereinafter called "Discount"), any moneys which might become payable under a policy then in preparation and to accept the bank's receipt in full discharge therefor. On January 27, 1961, Discount discounted the bill of exchange drawn by the company and accepted by Robinet, and paid the company the sum of 4,212 2s. 10d. The policy was completed on March 8, 1961, and paragraph 1 read : "(1) The guarantors [E.C.G.] in consideration of the premium paid and to be paid by the exporter [the company] as specified in paragraph 18 hereof agree, subject to the terms hereof, to pay to the exporter a percentage of the amount of any loss as hereinafter defined which he may sustain in connection with the export from the United Kingdom between October 1, 1960, and September 30, 1961, of any goods under a contract to which this guarantee applies by reason of the occurrence after the export of such goods of any of the following causes : ( i ) the insolvency of the buyer as hereinafter defined, or ( ii ) the failure of the buyer to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge on the book debts of the company, and as such is void against the plaintiffs under section 95 of the Companies Act, 1948. The course of events is not in dispute and may be shortly stated as follows. [His Lordship stated the facts substantially as set out above, and continued:] Upon the hearing of the action evidence was given as to accountancy practice ; no other evidence was given. The witnesses were Mr. Weiss on behalf of the plaintiff, Mr. Ray Smith on behalf of the first defendant, and Mr. Russel and Mr. Gidley-Kitchin on behalf of the second defendant. All these four gentlemen are chartered accountants of standing. The effect of their evidence may be summarised as follows. Weiss had himself no personal experience of E.C.G. policies, but gave evidence as to matters of accountancy principle. The other three accountants had personal experience of E.C.G. policies and also gave evidence as to matters of principle. All four agreed that at the date of the letter of authority the E.C.G. policy ought not, in accordance with accountancy principles, to be entered in the books of the company as a book-debt. When I say "in accordance with accountancy principles," I mean in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability was accepted and the amount ascertained and the actual payment by E.C.G. the rights of the company under the policy would have to be reflected in whatever is the appropriate way in the balance-sheet in order to show the true position of the company. I turn now to section 95 of the Companies Act, 1948. That section, so far as now material, runs as follows: [His Lordship read section 95(1) and 2( e ) and continued :] It is not suggested that any of the other paragraphs in subsection (2) are material. Looking at the matter for a moment apart from authority, I do not think that in ordinary speech one would describe as a "book-debt" the right under a contingency contract before the contingency happens. By "contingency contract" in the connection I mean contracts of insurance, guarantee, indemnity and the like However, this point is not free from authority, and I have been referred to two cases as to what is meant by a "book-debt." The first case is Shipley v. Marshall [1863] 14 CBNS 566 , where the four members of the Common Plea Divisional Court gave judgments as to the meaning of the word "book-debt"; I will quote a few sentences from those judgments. Erie C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey J. as intending either to differ from the members of the Common Plea Divisional Court or as regarding them as having put different definitions on the expression. A certain difficulty is caused by the use of the words "would or could," [1962] 1 W.L.R. 974, 983 ; 32 Comp. Cas. 1090 It will be remembered that Williams J. uses the two words in successive sentences [1863] 14 C.B.N.S. 566, 572; Byles J. says "They must be such debts as are" Ibid. 573; and Buckley J. says "would or could." [1962] 1 W.L.R. 974, 983 I think, however, that bearing in mind the context and the use of the following words "in the course of such a business," Ibid. 983 and the reference to "well-kept books," Ibid Buckley J. is intending to apply what may be called a practical rather than a theoretical test, the test being: Is it the practice in well-kept books to enter the debt in question in the ordinary course of business? If there is any difference between the way in which it is put by the various judges, I would accept myself the way in which Byles J. put it, that "they must be such debts as are commonly entered in books." [1863] 14 CBNS 566, 573 I will refer again to the judgment of Buckley J. on another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a company. Mr. Sutcliffe relied on another principle laid down by Buckley J. in Independent Automatic Sales Ltd. v. Knowles Foster [1962] 1 WLR 974 32 Comp. Cas. 1090 . After holding that upon the true interpretation of the hire-purchase agreement "the hirer became immediately liable to the extent of his minimum liability under it notwithstanding that some part of that liability is to be discharged by future payments," Buckley J. went on as follows Ibid 985 : "Secondly, in my judgment, a charge on future book-debts of a company is registrable under section 95. That it is competent for anyone to whom book-debts may accrue in the future to create an equitable charge upon those book-debts which will attach to them as soon as they come into existence is not disputed (See Tailby v. Official Receiver [1883] 13 App Cas 523 ; 4 TLR 726). That such a charge can accurately be described as a charge on book-debts does not appear to me to be open to question. Such a charge would not, of course, be effective until a book-debt came into existence upon which it could operate. Nevertheless, I think it would be accurate to speak of the charge being created at the date of the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
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