''Re Curtain Dream plc''

990 Year 990 ( CMXC) was a common year starting on Wednesday of the Julian calendar. Events By place Europe * Al-Mansur, Chancellor and effective ruler of Al-Andalus, conquers the Castle of Montemor-o-Velho (modern Portugal), expanding t ...

BCLC 925 is a judicial decision of the English courts in relation to

recharacterisation Recharacterisation in law (and sometimes in accountancy) means the treatment of a certain course of conduct in a different manner to which the participants describe it. The term is most important in the penal law of Continental legal systems. In s ...

. It held that where a transaction was documented in a certain way to mask the true nature of the transaction, the court could disregard the mask and construe the transaction as it was intended to be in truth. The court held that properly construed the transaction in question was a

mortgage A mortgage loan or simply mortgage (), in civil law (legal system), civil law jurisdictions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners t ...

which was

void Void may refer to: Science, engineering, and technology * Void (astronomy), the spaces between galaxy filaments that contain no galaxies * Void (composites), a pore that remains unoccupied in a composite material * Void, synonym for vacuum, a s ...

against a liquidator for non-registration.

Facts

Curtain Dream plc was a fabric company. It was indebted to

Barclays Bank Barclays PLC (, occasionally ) is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services ...

who had taken security over all of the company's assets. Subsequently, the company entered into a financing arrangement with Churchill Merchanting Ltd. Under that arrangement the company would sell all of its stock in trade to Churchill. Churchill would then sell that stock back to the company on retention of title terms, such that the stock remained the property of Churchill until the company sold it to a third party. The company would then use the proceeds of sale to pay Churchill the original purchase price plus accrued interest. The fabric itself remained at all times in the company's warehouse and never moved. The company failed and Barclays appointed receivers. The receivers then brought an application challenging the financing arrangements with Churchill, alleging that in reality it amounted to a mortgage, and that the mortgage was not enforceable because it had not been registered as required by section 395 of the

Companies Act 1985 The Companies Act 1985 (c. 6) is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their ...

Decision

The case came before Knox J. He reviewed the relevant authorities on financing transactions and mortgages, including the judgment of Lord Hanworth MR in ''Re George Inglefield Ltd''

933 Year 933 ( CMXXXIII) was a common year starting on Tuesday of the Julian calendar. Events By place Europe * Spring – Hugh of Provence, king of Italy, launches an expedition to Rome to remove the Roman ruler (''princeps'') Albe ...

Ch 1, particularly his comment that: "It is old law, and plain law, that in transactions of this sort the Court must consider whether or not the documents really mask the true transaction. If they do merely mask the transaction, the Court must have regard to the true position, in substance and in fact, and for this purpose tear away the mask or cloak that has been put upon the real transaction." He also reviewed ''Manchester Sheffield and Lincolnshire Railway Co v North Central Wagon Co'' (1888) 13 App Cas 554. Ultimately he decided that in truth the transaction was a financing arrangement. Churchill were not traders in fabric and had never taken possession of it. The terms of the agreements made it clear that funds were being advanced on credit and were subject to interest at commercial rates. The transfer and re-transfer of title to the fabric was, in truth, a mortgage and was unenforceable for non-registration.

Appeal

An appeal was lodged against the decision,See comments of Staughton LJ in ''

Welsh Development Agency v Export Finance Co Ltd ''Welsh Development Agency v Export Finance Co Ltd''

992 Year 992 ( CMXCII) was a leap year starting on Friday of the Julian calendar. Events By place Worldwide * Winter – A superflare from the sun causes an Aurora Borealis, with visibility as far south as Germany and Korea. Euro ...

BCLC 148 (often abbreviated to ''WDA v Exfinco'') is a judicial decision of the Court of Appeal of England and Wales, English Court of Appeal. The decision related to a number of aspec ...

BCLC 148 at 186D-E. but was abandoned before the hearing date.

Footnotes

{{DEFAULTSORT:Curtain Dream plc, Re 1990 in United Kingdom case law United Kingdom insolvency case law Barclays litigation