The powers of a bank at execution stage of fixed and floating charges instruments.

Siv Potayya

Barrister

In 1969, the then Governor General, Sir Leonard Williams, gave his assent to the coming into force of the ‘’Loans, Charges and Privileges(Authorised Bodies) Act 1969 ‘’. Banks were thus enabled to create fixed and floatingcharges under private signaturei.e without the intervention of a Notary Public.

The Act of1969wassubsequently deleted and the regime of fixed and floating charges is now found under article 2202 of our civil code.

Any fixed or floating charge is “exécutoire”i.e it may be enforced without a judgment from the court. However, before its enforcement a floating charge need be crystallised into a fixed charge so as to know exactly ‘’l’assiette de la sûrete fixe’’.

Charge documents are drafted by the bank and areexecuted at the bank’s premises between the bank and the owner of the property. If , on the one hand ,the Notary Public is has the obligations tocomply with the provisions of the Notaries Act for the execution of any deed namely: “hypothèques”, deed of conveyance etc….; on the other hand, there is no similar statutory obligations on the bank.

Would there be inequality of arms?

The Notaries Ordinance of 1942 has gone through various amendments to ultimately become the Notaries Act 2008 under which Section14 headedsubscribingnotarialdeeds reads as follows:

(1) Before a party or witness is required to subscribe a notarial deed, the notary shall—

(a) ascertain that no witness to the deed is disqualified under this Act;

(b) read out the deed to the party, in the presence of the witnesses, if any;

(c) ascertain whether the party and the witnesses, if any, sufficiently understand the language in which the deed is drawn up to understand its contents;

(d) where a party or a witness does not understand the language or the contents of the deed, explain its contents to that person in a language which he understands or, if he is unable to do so, make use of the assistance of an interpreter who will explain the contents of the deed and sign it;

(e) cause the party and the witnesses, if any—

(i) to sign the deed and any marginal note made under section 13;

(ii) to initial the foot of the recto of every page and every addition made under section 13;

(f) record at the end of the deed the fact that paragraphs (a) to (e) have been complied with;

(g) sign—

(i) the deed; and

(ii) any addition made under section 13, and

(h) initial the foot of the recto of every page and every marginal note made under section 13.

(2) Where a party to a notarial deed is unable to sign the deed by reason of illiteracy or physical incapacity—

.(a) the party shall affix his fingerprint to the deed; or

.(b) there shall be 2 witnesses or, as the case may be, 2 further witnesses to the deed; and

.(c) the notary shall—

.(i) record the fact of, and the reason for, the inability of the party to sign;

.(ii) record of which particular finger a print is affixed; and

.(iii) certify that the party affixed the print to the deed in his presence and in that of the witnesses referred to in paragraph (b).

(3) Where a notary fails to comply with any provision of subsection (1) or (2), this shall render the deed voidable.

The fixed and floating charges documents are drafted in English and they are governed by ‘laloi du contrat’ under our civil code.Some sentences contain more than one hundred and fifty words without a coma or a semi column but fortunately, at long last, a full stop. Some stipulations thereof are against ‘’ l’ordre public’’ and some are of no relevance.

How does our court, therefore, ascertain that the contents of any fixed or floating charge had been understood by the person burdening his property. How many bankers do really understand or rather pretend to understand the contents thereof before it has, in certain cases,allegedly been “read and approved”before it is handed over for signature?

Does the above situation not call forthe need to have the bank and the Notary Public on an equal footing so far execution of charge documentisconcerned?