HC Deb 26 October 1989 vol 158 cc1163-4

406.—(1) A chargee exercising a power of sale may dispose of property to a purchaser freed from any interest or right arising from the charge having become void to any extent by virtue of this Part—

  1. (a) against an administrator or liquidator of the company, or
  2. (b) against a person acquiring a security interest over property subject to the charge; and a purchaser is not concerned to see or inquire whether the charge has become so void.

(2) The proceeds of the sale shall be held by the chargee in trust to be applied—

First, in discharge of any sum effectively secured by prior incumbrances to which the sale is not made subject;

Second, in payment of all costs, charges and expenses properly incurred by him in connection with the sale, or any previous attempted sale, of the property;

Third, in discharge of any sum effectively secured by the charge and incumbrances ranking pari passu with the charge;

Forth, in discharge of any sum effectively secured by incumbrances ranking after the charge;

and any residue is payable to the company or to a person authorised to give a receipt for the proceeds of the sale of the property.

(3) For the purposes of subsection (2)—

  1. (a) prior incumbrances include any incumbrance to the extent that the charge is void as against it by virtue of this Part; and
  2. (b) no sum is effectively secured by a charge to the extent that it is void as against an administrator or liquidator of the company.

(4) In this section—

  1. (a) references to things done by a chargee include things done by a receiver appointed by him, whether or not the receiver acts as his agent;
  2. (b) "power of sale" includes any power to dispose of, or grant an interest out of, property for the purpose of enforcing a charge (but in relation to Scotland does not include the power to grant a lease), and references to "sale" shall be construed accordingly; and
  3. (c) "purchaser" means a person who in good faith and for valuable consideration acquires an interest in property.

(5) The provisions of this section as to the order of application of the proceeds of sale have effect subject to any other statutory provision (in Scotland), any other statutory provision or rule of law) applicable in any case.

(6) Where a chargee exercising a power of sale purports to dispose of property freed from any such interest or right as is mentioned in subsection (1) to a person other than a purchaser, the above provisions apply, with any necessary modifications, in relation to a disposition to a purchaser by that person or any successor in title of his.

(7) In Scotland, subsections (2) and (7) of section 27 of the Conveyancing and Feudal Reform (Scotland) Act 1970 apply to a chargee unable to obtain a discharge for any payment which he is required to make under subsection (2) above as they apply to a creditor in the circumstances mentioned in those subsections.