Case Number
CA 2833/04
Date Decided
8-3-2009
Decision Type
Appellate
Document Type
Full Opinion
Abstract
Facts: The respondent company, Dan Rolider Ltd., purchased heavy engineering equipment from the appellant, Regis Ltd., and agreed that a charge would be placed upon the equipment in favor of the appellant. The appellant failed to register the charges with the Registrar of Companies within the statutory 21 days. The appellant defaulted on its debt to the respondent, the CEO and controlling shareholder of the appellant company died, and an application was made to liquidate the company. Following the application for liquidation of the company, the respondent filed an application with the Registrar of Companies to extend the period for the registration of the charges, pursuant to s. 191 of the Companies Ordinance. The request was granted, and the Registrar issued registration certificates to Regis pursuant to s. 185 (a) of the Companies Ordinance. The appellant therefore claimed that it was a secured creditor in regard to the charged equipment, whereas the trustee appointed to liquidate the respondent company dismissed this claim. The District Court ruled that once the Registrar had issued a registration certificate, the charge was to be regarded as having met all the requirements of s. 178(a) of the Companies Ordinance with respect to the date of registration. The court therefore rejected the trustee’s claim regarding the invalidity of the charge vis-à-vis third parties. Nevertheless, the court ruled that the registration of the charge was void due to it being a fraudulent preference, within the meaning of s. 98 of the Bankruptcy Ordinance and s. 355 of the Companies Ordinance.
Held: The Court denied the appeal. Justice M. Naor (Justices E. Arbel and E. Rubinstein concurring) differed in her opinion regarding fraudulent preference from that of the District Court , and ruled that the case did not involve “unlawful pressure or persuasion on the part of that creditor or on his behalf” under s. 98 of the Bankruptcy Ordinance. However, the Court nonetheless decided to deny the appeal, as it held that a charge that was registered late could not be validated for three reasons: First, as a rule, the registration of a charge should not be allowed after the commencement of liquidation proceedings, because once the liquidation has commenced, the parties’ expectations crystallize, and a charge that harms those expectations should not be recognized. Secondly, allowing the late registration of a charge, following the commencement of liquidation proceedings, undermines the goals of registration. Finally, the late registration of a charge after liquidation proceedings have commenced should not be recognized in the case at hand for reasons of good faith at the time of registering the charge and because of the delay involved in registering the charge.
Keywords
Administrative Law -- Discretion, Bankruptcy, Corporations
