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Fixed before floating regardless of date of creation. If deciding hierarchy between floating charges, then date of registration will decide priority- earliest registered first gets priority. If deciding hierarchy between fixed charges, then date of creation will decide priority- earliest created first gets priority. I think with regard to fixed charges on land this may be different but I think this might not be relevant for the exam. Is the preceding information correct?
It was the following post that made me curious about the above question-
https://opentuition.com/topic/priority-of-fixed-and-floating-charges/
Jon, my heartfelt thanks for re-opening this can of worms (not!)
Such is the apparent inconsistency that I resorted to AI for definitive clarification.
For BOTH fixed and floating prioritisation, the date or CREATION is the key factor. AI states that the date of registration is not really of any consequence.
OK, that’s pretty clear.
So then I asked AI ‘On what date is a charge created?’
And the response is replicated here:-
‘A charge is considered ‘created’ on the date when all the necessary paperwork is completed, signed, sealed, and filed with the Registrar of Companies. It is the date when the details of the charge are entered into the company’s own Register of Mortgages and Charges.’
So it’s not created until it has been registered. To my simple mind, that means that the date of registration IS the key factor in determining priority of charges over the same asset.
Can you agree?
In my mind that makes a lot of sense. It would help avoid situations where another charge is taken out on the same assets or assets without the second lender being aware the first charge existed. Or in better words, without having a reasonable opportunity to be aware one existed. Of course I imagine that undertakings could be sought that no previous charges exist from the borrower. However, fraud or negligence could still happen. I imagine banks and lenders would also have insurance to mitigate this risk. In any event I would suggest lenders register their charges as soon as feasible in the correct way. That’s my major takeaway from this topic.
Anyway, thank you for your answer. It bothered me when I saw the question and realised I didnt know the answer.I made reference to land because of information from the following link-
https://www.fsp-law.com/priorities-of-security-an-overview/
Regardless, I would suggest following your approach.
But now we see a further problem! Creation is the date of registering in the Register of Mortgages and Charges. But only a company has the right to enter matters into its own statutory books.
However, foreseeing problems, it is also available to the lender directly to register a charge with the Registrar of Companies.
Now then! Is Creation date the date that the charge is registered in a company’s own Register of Mortgages and Charges or, more likely, is it the date on which the charge is registered with the Registrar of Companies.
Your Mission, Jon, should you care to accept it is ……
I’ve just followed up this issue, again with AI.
Here’s my question:
‘re registration and creation of charges, is creation date the date that the charge is registered in a company’s own Register of Mortgages and Charges or is it the date on which the charge is registered with the Registrar of Companies?’
And here’s the answer:
‘The creation date of a charge refers to the date when all the paperwork is completed, signed, sealed, and filed with the Registrar of Companies, and the details are entered into the company’s own Register of Mortgages and Charges. It is not the date on which the charge is registered with the Registrar of Companies.’
NOTE PARTICULARLY THE LAST SENTENCE.
On reflection, it seems to me that all the paperwork must have been prepared, signed and sealed. It’s all then sent to the Registrar for the Registrar to update its own version of the company’s Register of Mortgages and Charges.
But STILL the charge is not ‘created’
Only when the charge has been entered into the company’s own Register of Mortgages and Charges do we appear to have satisfied all the requirement of creating a valid charge
Thank you for raising this issue again, Jon. It has made me revisit the problem and, I’ll have to admit, it has taught me a point about which I didn’t know I was unclear!
That’s very interesting. If I were a charge holder I’d be making an appointment to see the register of Mortgages and Charges. Interesting that that is the case in the world of today. I wonder if there are any cases where a fixed charge hasn’t been recorded in said register. This seems like a mistake that wouldn’t be made. However, I am reminded of movies that don’t have full copyright protection because they failed to show the proper copyright notice in the credits when this was required by law.
Hmmm. But we seem to be getting more and more remote from the depth that ACCA Law paper is looking for.
Let’s leave it there!
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