Fivestar Properties Ltd v the Insolvency Act 1986 and Others
| Jurisdiction | England & Wales |
| Judge | Hhj David Cooke |
| Judgment Date | 08 October 2015 |
| Neutral Citation | [2015] EWHC 2782 (Ch) |
| Docket Number | Case No: 6369 of 2015 |
| Court | Chancery Division |
| Date | 08 October 2015 |
[2015] EWHC 2782 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
HHJ David Cooke
Case No: 6369 of 2015
and
Amit Gupta (instructed by Gateley Plc) for the Applicant
No other party appeared or was represented
Hearing date: 28 September 2015
On 28 September 2015 I made an order on the application of West Bromwich Commercial Ltd ("the Bank") for the restoration of Fivestar Properties Ltd ("the Company") to the Register and its immediate winding up by the Court, also making consequential provision including in particular a decision that in consequence of the restoration a freehold commercial property at Croydon ("the Property") which is registered in the name of the Company and charged to the Bank, is, or perhaps it might be said is again, vested in the Company, notwithstanding the previous dissolution of the Company and disclaimer of the freehold by the Crown. The intention behind the application is that negotiations for a new lease of the Property may now be concluded and the freehold sold with the benefit of a new lease, the proceeds going, in the first instance at least, to the Bank under its charge. It appears there is no previous authority precisely on point, so Mr. Gupta invited me to state reasons for my decision which might be reported. These are those reasons.
The facts
The Company was incorporated in 2003 with the stated object of development and sale of real property. In 2006 the Bank made a secured loan facility available to the Company, pursuant to a facility letter dated 21 July 2006 which it appears was drawn down on or about 16 August 2006. On that date the Company granted security to the Bank including a legal charge over the Property, which appears to have been its principal asset, and a general floating charge over its assets and undertaking. It appears that part at least of the Bank's advance was used to discharge earlier borrowing from Northern Rock plc, since although a fixed charge in favour of Northern Rock dated 9 June 2003 remains on the Charges Register at Companies House, Northern Rock has confirmed that its lending was discharged on 17 August 2006 and its charge was removed from the Land Register.
On 8 February 2011 following default the Bank made demand on the Company for repayment of just under £3.15m, which was not paid. On 9 June 2011 the Bank appointed Law of Property Act receivers ("the Receivers") pursuant to its legal charge over the Property, who pursued the collection of rent apparently outstanding due from the tenant in occupation of the Property. It became apparent that the tenant had paid about £175,000 due in respect of rent to North Salford Estates Ltd, a company connected with the Company which acted as managing agent for the Property, but that it had not been paid over to the Company. The Receivers recommended that the Company be placed in administration so that administrators with wider powers than their own might investigate this and other dealings between the Company and North Salford Estates Ltd.
The Bank therefore appointed administrators ("the Administrators") to the Company on 25 July 2012, which it was entitled to do under para 14 of Sch B1 Insolvency Act 1986 as the holder of a qualifying floating charge. This did not have the effect of ending the appointment of the Receivers, which the Administrators agreed should continue (they could have required the Receivers to vacate office pursuant to para 41(2) of Sch B1 had they so chosen).
Dissolution and disclaimer
The Administrators concluded a settlement of claims against North Salford Estates Ltd under which just under £130,000 was paid to the Company and on 6 January 2014 filed a final report and gave notice to move the Company from administration to dissolution under para 84(1) of Sch B1. Para 84 provides as follows:
" Moving from administration to dissolution
84(1) If the administrator of a company thinks that the company has no property which might permit a distribution to its creditors, he shall send a notice to that effect to the registrar of companies…
(4) On the registration of a notice in respect of a company under sub-paragraph (1) the appointment of an administrator of the company shall cease to have effect…
(6) At the end of the period of three months beginning with the date of registration of a notice in respect of a company under sub-paragraph (1) the company is deemed to be dissolved."
The conclusion that "there are no further assets that remain to be realised" was stated in the Administrators' final report, though the same report refers to the Company's continued ownership of the Property. It is not clear whether the Administrators thought that the freehold had no value (that seems unlikely) or considered that it was to be left out of account because it was under the control of the Receivers for the benefit of the secured creditor. If the latter was the case, then it seems to me doubtful whether that can have been a correct view, though as the point was not argued before me I should not express a concluded opinion on it.
In Re GHE Realisations Ltd (formerly Gatehouse Estates Ltd) [2005] EWHC 2400 (Ch) Rimer J held that the para 84 procedure was not limited to cases where the company never had any assets that might have enabled a distribution to creditors (a view previously expressed by Blackburne J, obiter) so that it might be used where there had been such assets but they had now been realised and all potential distributions made—but unsurprisingly he did not consider the position where valuable assets still existed but were not, for some reason, in the control of the administrators themselves. At para 21 of his judgment he said this:
"[The] view … is expressed in Corporate Administrations and Rescue Procedures, 2004, Fletcher, Higham and Trower, page 418 … that the duty under para 84 will arise in two categories of case: (i) where it transpires that the company has no property available for distribution to creditors, and (ii) where the administrators have made distributions under para 65 and there is no further distribution to be made, whether through the medium of an administration or a liquidation."
But he did not expressly approve this statement, and referred to it for the purpose of contrast with the opinions of other authors concurring with Blackburne J. It seems to me, provisionally at least, that the purpose of the para 84 procedure is to enable the company to be efficiently put to rest when the creditors have no interest in it entering any other procedure (cf para 24 of the judgment of Rimer J) which will not be the case where further payments to creditors may be made out of any assets, whether at the time under the control of the administrator or not and whether the proceeds of realisations will go to unsecured or secured creditors.
Be that as it may, it is not suggested that the para 84 notice was of no effect. It was duly registered and the company was recorded as being dissolved three months later, on 8 April 2014.
The Receivers continued to deal with the lease of the Property, which was due to expire on 24 March 2014 but extended pursuant to the tenant's request for a new lease under the Landlord and Tenant Act 1954. The Receivers have continued to negotiate terms for a new lease, which are said to be almost concluded. To protect its position the tenant issued a claim for a new lease under the 1954 Act on 30 April 2014.
By that date the Company had been dissolved and any assets remaining in its ownership vested in the Crown as bona vacantia pursuant to s 1012 Companies Act 2006, which provides:
"1012 Property of dissolved company to be bona vacantia
(1) When a company is dissolved, all property and rights whatsoever vested in … the company immediately before its dissolution … are deemed to be bona vacantia and—
(a) accordingly belong to the Crown…, and
(b) vest and may be dealt with in the same manner as other bona vacantia accruing to the Crown…
(2) Subsection (1) has effect subject to the possible restoration of the company to the register under Chapter 3 (see section 1034)."
The tenant therefore served notice of the claim under the 1954 Act on the Treasury Solicitor, who represents the Crown's interest in matters relating to bona vacantia. In response however the Treasury Solicitor served notice on 19 May 2015 disclaiming on behalf of the Crown the interest vested in it under s 1012. The provisions of the Companies Act relevant to such disclaimer in the present context are as follows:
"1013 Crown disclaimer of property vesting as bona vacantia
(1) Where property vests in the Crown under section 1012, the Crown's title to it under that section may be disclaimed by a notice signed by the Crown representative, that is to say the Treasury Solicitor…
(3) A notice of disclaimer must be executed within three years after—
(a) the date on which the fact that the property may have vested in the Crown under section 1012 first comes to the notice of the Crown representative…
(4) If an application in writing is made to the Crown representative by a person interested in the property requiring him to decide whether he will or will not disclaim, any notice of disclaimer must be executed within twelve months after the making of the application or such further period as may be allowed by the court.
(5) A notice of disclaimer under this section is of no effect if it is shown to have been executed after the end of the period specified by subsection ( 3) or (4).
(6) A notice of disclaimer under this section must be delivered to the registrar [of Companies] and retained and...
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