Freehold property – Vesting order – Legal title – Claimant Guernsey registered company holding legal title to property – Individual occupying and carrying on business from property – Both parties seeking competing vesting orders – Effect of dissolution and subsequent restoration of foreign registered company on devolution of real property in England held on trust – Whether individual having standing to seek vesting order – Application in first action allowed – Application in second action dismissed
In two actions, the claimants, H (the first action) and WPL (the second action), sought competing vesting orders in their favour pursuant to section 44(ii)(c) of the Trustee Act 1925 in respect of the property known as Walton Castle, located in Somerset.
WPL was wholly owned by MPL, which also owned MMSA: all three were Guernsey registered companies. MPL was wholly owned by R. At all material times prior to its dissolution, WPL held the legal title to the property, on trust as to a 61.06% share for MMSA. The present claims arose as a result of the dissolution of WPL and MPL on 12 May 2020. Both companies were restored to the Guernsey register in May 2021.
WPL’s primary case was that it was the legal owner of the property by reason of it having automatically revested in it following restoration. In the alternative, WPL claimed a vesting order under the Trustee Act 1925 and section 181 of the Law of Property Act 1925.
H was an individual who occupied and carried on a wedding and events business from the property. In September 2020, H issued a claim for an order vesting legal title in the property in her name in a bid to safeguard the property and the business conducted therefrom. Her primary case was that MMSA validly assigned its 61.06% beneficial interest in the property to her in December 2017 in satisfaction of a debt.
The second and third defendants, as R’s trustees in bankruptcy, opposed the claim on the basis that H was unsuitable to act as trustee and/or that such an order could jeopardise their interest in the property. Further, following its restoration, legal title to the property automatically revested in WPL, rendering H’s claim redundant.
Held: The application in the first action was granted. The application in the second action was dismissed.
(1) The law governing the devolution of freehold property in England held on trust of land by a foreign registered company (which was subsequently dissolved) was English common law. The legal estate in such circumstances did not pass by escheat to the Crown but rather vested in it. Thus, there was no automatic revesting of the legal estate in the property in WPL upon its restoration to the Guernsey register.
The term “escheat” was a word of art pertaining to estates held by tenure and which broadly speaking referred to the reversion of an estate to the relevant donor. Given the feudal nature of tenure in real property, escheat was engaged where an existing freehold interest reverted to the tenant’s immediate lord, in modern times the Crown.
However, there was a distinction where real property was held by a company as a trustee in a trust of land. Upon dissolution of the company/trustee, the legal estate in that real property passed to the Crown and vested in it, subject to the trust. That operation was not by escheat, which only arose where a legal estate in property had been determined. In appropriate cases, the court might vest a new legal title in the affected property in a restored company by virtue of section 181 of the 1925 Act. By contrast, in the present circumstances, the legal estate did not determine and was not therefore capable of being held by the Crown through the operation of escheat: Re Strathblaine Estates Ltd [1948] Ch 228, UBS Global Asset Management UK Ltd v Crown Estate Commissioners [2011] EWHC 3368 (Ch); [2011] PLSCS 151 and Pennistone Holdings Ltd v Rock Ferry Waterfront Trust [2021] EWCA Civ 1021; [2021] EGLR 41 considered.
Section 181, in broad terms, provided that where, by reason of dissolution of a corporation, a legal estate in any property had determined, the court might by order create a corresponding estate and vest the same in the person who would have been entitled to it. Section 181 was not engaged here as the legal estate in the property had not determined.
(2) WPL’s reliance on section 58(1) of the Land Registration Act 2002 was also misconceived. Section 58 was only engaged once a disposition had been completed by registration. Section 27(1) of the 2002 Act provided that a disposition did not operate at law until the registration requirements were met. Where property was held by a corporate proprietor prior to its dissolution, the disposition to the Crown operated by law notwithstanding the absence of registration requirements reflecting the disposition. The mere fact that a company had been named as the registered proprietor in this case did not affect the legal position, which was that legal title in the property was vested in the Crown and remained so, unless and until an order was made vesting it in another person.
There was no force in the argument or any principled basis which would lead to an alternate approach to the general principle that the lex situs would govern devolution in the present case; land in England was subject to English law. The property did not therefore automatically revest in WPL upon its restoration to the Guernsey register: Lizzium Ltd v Crown Estate Commissioners [2021] EWHC 941 (Ch); [2021] PLSCS 81 considered.
(3) H had sufficient standing to apply for a vesting order in the first claim. The trustees had adduced no proper grounds for asserting that the assignment was not authentic. Similarly, the trustees had not advanced any challenge to the authenticity of the signature on the relevant deed of assignment or that it was signed by R in his capacity as chair of MMSA. The allegation that the assignment was at an undervalue would only be actionable, if at all, by a claim by MMSA to set aside the assignment.
H’s charging order over MMSA’s beneficial interest conferred upon her sufficient standing in any event: Midland Bank v Pike [1988] 2 All ER 434 considered.
(4) There was no compelling evidence before the court beyond mere assertion that H was unsuitable to act as trustee. On balance, vesting legal title to the property in H was the pragmatic approach in the circumstances. While the trustees contended that it would be more onerous for WPL to realise its beneficial interest in the property if vested in H (because it would then have to apply for an order for sale under section 14 of the Trusts of Land and Appointment of Trustees Act 1996), it was likely that if vested in WPL, a claim would have to be brought in any event to enable WPL to obtain possession and effect a sale of the property in the face of H’s opposition and beneficial interest.
It remained open to the trustees/WPL to apply under the 1996 Act for an order for sale to seek to realise their beneficial interest if such a course was deemed necessary. H’s conduct might be regulated through the 1996 Act, which provided a measure of protection to WPL, the trustees and other interested parties with respect to the administration of the trust: Potier v Treasury Solicitor (Bona Vacantia) [2021] EWHC 1524 (Ch) considered.
Edward Francis (instructed by Blake Morgan LLP) appeared for the claimant in the first action; Stefan Ramel and Nicholas Evans (instructed by Freeths LLP) appeared for the second and third defendants in the first action and the claimant in the second action; the defendant did not appear and was not represented.
Eileen O’Grady, barrister
