Company – Administration – Transfer of property – Respondent administrators applying for order requiring appellant to transfer registered title of properties to company – Judge granting application – Appellant appealing – Whether properties held on trust for company – Whether respondents establishing company’s entitlement to property – Whether company holding properties on constructive trust – Appeal allowed
The respondents were the joint administrators of a company (C) and the liquidators of an associated company (N). The appellant was the registered freehold owner of six properties, which he let out as a business. By a written agreement in 1999, he agreed to sell the business to N. Under clause 6.2, completion would take place on notice by either party. In 2002, the appellant set up a family trust and incorporated C in Jersey. By an agreement in 2003, N agreed to sell the properties to C. Although the appellant and N received the consideration to which they were entitled under the 1999 and 2003 agreements, no transfers of legal title to the properties were executed. The legal title remained vested in the appellant.
N was subsequently wound up and C went into administration. The respondents asked the appellant to complete Land Registry transfer forms on the basis that the properties were held on trust for C. When he refused, the respondents applied for an order requiring the appellant to transfer the registered title of the properties pursuant to section 234 of the Insolvency Act 1986 on the basis that C had become the beneficial owner as a result of the 1999 and 2003 agreements and was entitled to an immediate transfer without the need for notice. The appellant contended that he had regained beneficial ownership of the properties due to his ongoing personal liability under a personal loan.
The court granted the application holding that the benefit of the 1999 agreement had passed to C by constructive trust: [2019] EWHC 1772 (Ch); [2019] PLSCS 128.
The appellant appealed. The respondents sought to support the judge’s order by relying on the subsequent assignment of the benefit of the 1999 agreement to C and service of a clause 6.2 notice.
Held: The appeal was allowed.
(1) Section 234 of the 1986 Act created a summary procedure whereby the office holder in his own name might seek the transfer of company property to him. Section 234(2) gave the court power to direct the transfer to the office holder of any property, books or records to which the company “appears to be entitled”. Although the entitlement to such an order would depend upon the company’s apparent rights to the property in question and the judge would have to resolve any dispute about entitlement raised in the proceedings, the purpose of the power was to enable the office holder to carry out his statutory functions by placing the apparent property of the company under his control. Section 234 was not intended to cover the prosecution of a claim for specific performance or for damages in lieu: Smith (Administrator of Cosslett (Contractors) Ltd) v Bridgend County Borough Council [2001] UKHL 58 followed.
(2) The relationship between the parties was contractual. The rights which the respondents relied on as the basis of their claim were derived from the 1999 and the 2003 agreements and their enforceability. C obtained loans to fund its purchase of the properties on the basis that it was about to enter into a contractual obligation to pay £1.3m for the properties in return for the obligation on the part of N to transfer the legal estate. The financing of the purchase price and the consequent treatment of the properties as assets of C gave it the means of acquiring the legal estate in the properties which it had bargained for and remained enforceable up to and including the hearing of the application. C never relied upon the prospect of being assigned the benefit of the 1999 agreement; nor was that the common intention of the parties. The property transactions between them took the form of a sale followed by a sub-sale and the rights under both remained legally enforceable. There was no basis for the intervention of equity in that legal relationship by way of a constructive trust.
(3) In the case of an unconditional contract for the sale of real property, the vendor was treated as a trustee of the property for the purchaser pending completion. The relationship existed as an incident of the contractual relationship and was no more than a consequence of the principle that equity treated as done that which ought to be done. Whatever might be the precise nature of the beneficial interest enjoyed by a purchaser under the contract of sale, prior to completion of the contract, the purchaser had no equity in the property which he could transfer to a sub-purchaser so as to be binding against the vendor. The 2003 agreement did not, by operation of law, transfer to C a beneficial interest in the properties which was enforceable directly against the appellant: Berkley v Poulett [1977] 1 EGLR 86 followed.
(4) Even if C had obtained a beneficial interest, the question remained whether any right which C could enforce to obtain a transfer of the legal estate was conditional on compliance with the contractual requirement for the service of a notice to complete. C could only obtain a transfer of the legal estate by serving a contractual notice on N requiring it to take steps under the 1999 agreement against the appellant in order to make title; but that was never done.
(5) As a general rule, until a court order was entered by being sealed in the Registry, the judge was free to reopen and reconsider the matters at issue. In the present case, the judge had not been asked to take into account the post-judgment assignment and notice under the 1999 agreement although he was made aware of them when considering permission to appeal. The general practice of the Court of Appeal was not to allow an appellant to raise for the first time on appeal a point which could have been taken in the court below. The remedy for the respondents was to commence new proceedings based on the recent assignment and notice, to which the appellant could raise any defence available to him: Jones v MBNA International Bank [2000] EWCA Civ 514 followed.
Richard Lander (instructed by Chandler Harris LLP, of Manchester) appeared for the appellant; Mark Cawson QC (instructed by Drydensfairfax, of Leeds) appeared for the respondents.
Eileen O’Grady, barrister
