Key points
- Land owned by a dissolved company vests in the Crown subject to its trusts
- For escheat to arise, all interests in the land must have come to an end
- The court will exercise its jurisdiction to award a vesting order pragmatically
The devolution of freehold property in England and Wales held on trust by a foreign registered company, which is dissolved, is governed by English common law and not the law of the registered company, the High Court has decided in Hamilton v HM Attorney-General and others [2022] EWHC 2132 (Ch).
The background
Margarita Hamilton and Walton Street Properties both sought vesting orders in respect of Walton Castle in Somerset. Hamilton acquired the property in September 1988 and developed it into an established venue for weddings and corporate events. In August 2013 she sold the property to WSP, which held it on trust as to a two-thirds share to another company, Mercantil. That interest was assigned to Hamilton in 2017 in satisfaction of a debt. Both WSP and Mercantil were wholly owned by a third company, Ministros: all three were Guernsey registered.
The claims arose on the dissolution of WSP and Ministros in May 2020. The owner of Ministros was bankrupt and his trustees in bankruptcy were joined as defendants to Hamilton’s claim. Both companies were restored to the Guernsey register in May 2021 and the trustees brought their own action. The trustees disputed Hamilton’s claim on the ground that she was unsuitable to act as trustee and that such an order may jeopardise their interest, as ultimate shareholder in the property.
The arguments
Hamilton argued that there was no automatic revesting of the legal estate in the property in WSP on its restoration to the Guernsey register. The effect of dissolution of WSP was that the legal estate did not pass by escheat to the Crown but instead vested in the Crown subject to all existing interests under which it was held. WSP’s beneficial interest vested in the Crown, bona vacantia.
WSP and the trustees argued that the property automatically revested in WSP on restoration, that the freehold determined on WSP’s dissolution and vested in the Crown by escheat. There was no requirement for a vesting order as WSP was the registered proprietor of the property and so remained the owner of the legal estate under section 58 of the Land Registration Act 2002. The court should apply the law of Guernsey, a Crown dependency, to the ownership of the property on WSP’s restoration.
The decision
The court was clear, rejecting WSP’s arguments, that the law governing devolution of freehold property in England held on trust by a foreign registered company is English common law and not the law of the place of incorporation of the company, for the reasons advanced by Hamilton.
Escheat, one of the last relics of feudal law, is based on two propositions: that all land in England is held of the Crown; and that no land can be without an owner so, if the interest granted comes to an end, the land reverts to the Crown: Rock Ferry Waterfront Trust v Pennistone Holdings Ltd [2021] EWCA Civ 1029; [2021] EGLR 41. In such circumstances, the court could vest a new title in the restored company under section 181 of the Law of Property Act 1925.
However, since the legal estate continued it was not capable of vesting in the Crown by escheat. Instead, it vested in the Crown subject to the trusts on which it was held. Legal title remained with the Crown until an order was made vesting it in another person. There was no automatic revesting of the legal estate in the property in WSP on its restoration to the register and WSP’s reliance on section 58 of the 2002 Act was misconceived.
Vesting order
The court decided that Hamilton had sufficient standing to seek a vesting order based on the assignment of Mercantil’s two-thirds share in the property to her in 2017. The trustees could not establish that the assignment was not authentic. In any event, Hamilton had a valid charging order over Mercantil’s beneficial interest for the debt at the date of the assignment which conferred sufficient standing: Midland Bank v Pike [1988] 2 All ER 434.
The court has a wide discretion under section 44 of the Trustee Act 1925 to determine in whose favour a vesting order should be made, although there is little judicial guidance on determining competing claims. The court will exercise its power pragmatically to do justice in all the circumstances. It is not obliged to restore the status quo: Potier v Treasury Solicitor [2021] EWHC 1524 (Ch).
The wider circumstances of the case justified vesting the legal title in Hamilton. These included the fact that the status quo had changed materially since 2020, the trustees now having significant oversight over WSP, and that the business run by MH from the property was more likely to remain in continuous operation if a vesting order was made in her favour than in favour of WSP. While not determinative, continuation of the business was an issue to be properly considered by the court. There was no compelling evidence that Hamilton was not a suitable trustee. If necessary, her conduct could be regulated through the Trusts of Land and Appointment of Trustees Act 1996 which protected WSP and the trustees, who could, if necessary, seek an order for sale to realise their beneficial interest in due course.
Louise Clark is a property law consultant and mediator
