Mistral Asset Finance Ltd v The Registrar of Companies
| Jurisdiction | England & Wales |
| Judge | Halliwell |
| Judgment Date | 12 November 2020 |
| Neutral Citation | [2020] EWHC 3027 (Ch) |
| Date | 12 November 2020 |
| Docket Number | Case No: CR-2020-MAN-000585 |
| Court | Chancery Division |
[2020] EWHC 3027 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
INSOLVENCY AND COMPANIES LIST (ChD)
In the Matter of Buzzlines Coaches Limited
And in the Matter of the Companies Act 2006
His Honour Judge Halliwell sitting as a Judge of the High Court
Case No: CR-2020-MAN-000585
Dr Nathan Smith (instructed by Beyond Corporate Limited) for the Claimant
Hearing date: 29 th October 2020
APPROVED JUDGMENT
I direct that, pursuant to CPR PD 39A para 6.1, no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
HHJ
(1) Introduction
By these proceedings, the Claimant seeks a declaration that it remains entitled to a legal mortgage of leasehold property at 3A-3B Defiant Close, Hawkinge, Folkestone, Kent (“the Property”) following the dissolution of the mortgagor, Buzzlines Coaches Limited (“the Company”). The Claim Form also incorporates a claim for an order restoring the Company to the Register of Companies and, in the alternative, a vesting order under the provisions of Section 1017 of the Companies Act 2006. The Registrar of Companies has administratively restored the Company to the Register so as to dispense with the need for an order in respect of this part of the claim. However, the Company was not restored to the Register until after proceedings had been commenced and, by that time, the Treasury Solicitor had filed notice of disclaimer. Questions thus arise about the overall effect of the disclaimer.
At the hearing before me, Dr Nathan Smith appeared on behalf of the Claimant. The Defendants did not attend. Since it was not in existence when proceedings were commenced, the Company was not joined as a Defendant at that stage and it has not been formally joined as a party subsequently. However, I shall make an order providing for notice of the judgment to be served on the Company which will then be entitled, for a period of 28 days, to apply for an order varying or setting judgment aside and seek further directions under Section 1032(3) of the Companies Act 2006.
(2) Factual background
The registered leasehold title is based on a lease dated 25 th April 2016 between Pentland Properties Limited and the Company. It is for a term of 999 years at a yearly rent of £1. The premium was £310,000 plus VAT.
The Claimant is a specialist provider of vehicle purchase finance to bus and coach operators. In December 2017, it advanced funds to Buzzlines Travel Limited (“Buzzlines Travel”) and, by a legal charge dated 31 st December 2017 (“the 2017 Charge”), the Company charged the Property with Buzzline Travel's indebtedness. However, Buzzline Travel defaulted on its obligations to the Claimant and eventually went into insolvent liquidation.
On 31 st December 2019, the Company was struck off the Register of Companies and, on 7 th January 2020, it was dissolved. On 17 th March 2020 or thereabouts, the Treasury Solicitor filed notice of disclaimer but did not serve such notice on the Claimant until 19 th May 2020. This prompted the Claimant to commence the current proceedings on 1 st June 2020. However, it appears that, on 1 st July 2020, a former director of the Company submitted an application for administrative restoration under the provisions of Section 1024 of the 2006 Act and the Company was duly restored to the Register prior to the hearing before me.
(3) Disclaimer of bona vacantia on dissolution of companies
At common law, land was never entirely ownerless. The editors of Megarry and Wade on “the Law of Real Property” (9 th edn) (2019) observe, at Para 2–023, that, in the absence of a freehold owner or mesne lord, the freehold would historically return or escheat to the Crown. However, leasehold ownership was treated differently. Until the Companies Act 1929, a lease of land vested in a company simply came to an end if and when the company was dissolved, Hastings Corporation v Letton [1908] 1 KB 378. At that point, the reversion was accelerated and the company's immediate landlord became entitled to an estate in possession.
Following the Companies Acts 1929 and 1948, a dissolved company's property vests in the Crown as bona vacantia subject to the Crown's right of disclaimer. This includes freehold and leasehold property. In the event that the Crown disclaims the freehold title, it escheats in accordance with common law principles, Scmlla Properties Ltd v Geso Properties (BVI) Ltd [1995] BCC 793. The statutory regime is now contained in Part 31 of the Companies Act 2006 and applies to companies to which the Companies Acts apply. For other companies, the principles of escheat at common law are applicable at common law.
In the case of freehold land, the dissolution of the company and the exercise of the Crown's rights of disclaimer did not extinguish derivative interests at common law, such as leases or mortgages, see Scmlla Properties (supra) p808.
It has now been authoritatively established, in Hindcastle Ltd v Barbara Attenborough Ltd [1997] AC 70, that where a lease is disclaimed by a liquidator under the provisions of Section 178 of the Insolvency Act 1986, this does not operate to statutorily extinguish the rights and liabilities of third parties, such as sub-tenants and guarantors. Section 178(4) provides, in terms, that “a disclaimer…(a) operates so as to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company in or in respect of the property disclaimed; but (b) does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person” (My italics). These provisions are in essentially the same terms as Section 1015 (1) and (2) of the Companies Act 2006 (see below). In these respects, there can be no good reason for any distinction between the statutory regimes governing corporate insolvency and dissolution. It can reasonably be assumed that the Crown's disclaimer, under Section 1013 of the 2006 Act, does not operate to extinguish third party liabilities and rights.
(4) The statutory framework
The relevant statutory provisions, in Part 31 of the Companies Act 2006, are as follows.
1012 Property of dissolved company to be bona vacantia
(1) When a company is dissolved, all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution (including leasehold property, but not including property held by the company on trust for another person) are deemed to be bona vacantia and—
(a) accordingly belong to the Crown, or the Duchy of Lancaster or to the Duke of Cornwall for the time being (as the case may be), and
(b) vest and may be dealt with in the same manner as other bona vacantia accruing to the Crown, to the Duchy of Lancaster or to the Duke of Cornwall
(2) Subsection (1) has effect subject to the possible restoration of the company to the register under Chapter 3 (see section 1034).
1013 Crown disclaimer of property vesting as bona vacantia
(1) Where property vests in the Crown under section 1012, the Crown's title…may be disclaimed by a notice signed by the Crown representative…
1014 Effect of Crown disclaimer
(1) Where notice of disclaimer is executed under section 1013 as respects any property, that property is deemed not to have vested in the Crown under section 1012.
(2) The following sections contain provisions as to the effect of the Crown disclaimer-sections 1015 to 1019 apply in relation to property in England and Wales or Northern Ireland sections 1020 to 1022 apply in relation to property in Scotland.
1015 General effect of disclaimer
(1) The Crown's disclaimer operates so as to terminate, as from the date of the disclaimer, the rights, interests and liabilities of the company in respect of the property disclaimed.
(2) It does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person.
1016 Disclaimer of leaseholds
(1) The disclaimer of any property of a leasehold character does not take effect unless a copy of the disclaimer has been served (so far as the Crown representative is aware of their addressed) on every person claiming under the company as underlessee or mortgagee, and either—
(a) no application under section 1017 (power of court to make a vesting order) is made with respect to that property before the end of the period of 14 days beginning with the day on which the last notice under this paragraph was served, or
(b) where such an application has been made, the court directs that the disclaimer shall take effect.
1017 Power of court to make a vesting order
(1) The court may on application by a person who—
(a) claims an interest in the disclaimed property, or
(b) is under a liability in respect of the disclaimed property that is not discharged by the disclaimer,
make an order under this section in respect of the property.
(2) An order under this section is an order for the vesting of the disclaimed property in, or its delivery to—
(a) a person entitled to it (or a trustee for such a person), or
(b) a person subject to such a liability as is mentioned in subsection (1)(b) (or a trustee for such a person).
1024 Application for administrative restoration to the register
(1) An application may be made to the registrar to restore to the register a company that has been struck off the register…
(2) An application under this section may be made whether or not the company has in consequence been dissolved.
1028 Effect of administrative restoration
(1) The general effect of administrative restoration to the register is that the company is deemed to have...
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