Company – Dissolution – Freehold disclaimer – Company owning freehold commercial property as principal asset — Administrators dissolving company – Applicant bank applying to court for restoration of company to the Register and immediate winding up – Whether Crown disclaimer constituting disposition of property – Whether company restoration being appropriate – Application granted
The company was incorporated with the object of the development and sale of real property. The applicant bank made a secured loan facility available to the company which granted the applicant a legal charge over a freehold commercial property in Croydon, its principal asset, and a general floating charge over its assets and undertaking. Following default, the applicant demanded repayment from the company of just under £3.15m, which was not paid. The applicant then appointed Law of Property Act receivers pursuant to its legal charge, who pursued the collection of rent apparently outstanding due from the tenant occupying the property. The tenant had paid about £175,000 in respect of rent to a managing agent but it had not been paid over to the company. The receivers recommended that the company be placed in administration to enable administrators to investigate dealings between the company and the managing agent.
The applicant appointed administrators, which it was entitled to do under paragraph 14 of Schedule B1 to the Insolvency Act 1986 as the holder of a qualifying floating charge. The administrators concluded a settlement of claims against the managing agent under which £130,000 was paid to the company and filed a final report and gave notice to move the company from administration to dissolution under paragraph 84(1) of Schedule B1.
The applicant subsequently applied to the court for the restoration of the company to the Register and its immediate winding up and for a ruling that, in consequence of the restoration, the property was vested in the company, notwithstanding its previous dissolution and disclaimer of the freehold by the Crown, so that negotiations for a new lease of the property might be concluded and the freehold sold with the benefit of a new lease, the proceeds going to the bank under its charge.
Held: The application was granted.
(1) The purpose of the paragraph 84 procedure was to enable the company to be efficiently put to rest when the creditors had no interest in it entering any other procedure which would not be the case where further payments to creditors might be made out of any assets, whether at the time under the control of the administrator or not and whether the proceeds of realisations would go to unsecured or secured creditors. However, it was not suggested that the paragraph 84 notice had been of no effect in the present case. It was duly registered and the company was recorded as being dissolved. The receivers continued to deal with the lease of the property, extended pursuant to the tenant’s request for a new lease under the Landlord and Tenant Act 1954. The receivers had continued to negotiate terms for a new lease. To protect its position the tenant issued a claim for a new lease under the 1954 Act, by which time the company had been dissolved and any assets remaining in its ownership vested in the Crown as bona vacantia pursuant to section 1012 Companies Act 2006. The company had ceased to exist by virtue of its dissolution, and by virtue of the disclaimer its freehold interest in the property was deemed not to have vested in the Crown (section 1014(1) of the 2006 Act) but had nevertheless been terminated (section 1015(1)). The effect was that the land escheated (reverted) to the Crown, as immediate landlord. The disclaimer did not have the effect of extinguishing the Crown’s ultimate right to the land but only the Crown’s title to it under section 1012: Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793 and Re GHE Realisations Ltd (formerly Gatehouse Estates Ltd) [2005] EWHC 2400 (Ch) considered.
(2) The power to order restoration in the present case was given by section 1029(1)(b) of the 2006 Act. The applicant had standing to make the application and it was just to do so if the effect was that the property might be realised, or more readily realised, for the benefit of the applicant as secured creditor. Section 1012(1), which deemed the property to be bona vacantia, had effect subject to the possible restoration of the company to the register. The general effect of restoration was that the company was retrospectively deemed to have continued in existence as if it had not been dissolved (section 1032(1)), on which hypothesis the property in question never would have become bona vacantia. Subject to the possible effect of section 1034, if the Crown had in the meantime made a disposition of the property, the company was deemed always to have been the owner, as if it had never been dissolved.
In Allied Dunbar Assurance plc v Fowle & others [1994] 1 EGLR 122, the court held, in relation to a leasehold interest, that a Crown disclaimer was not a disposition. The court accepted that a disclaimer, whether by the Crown or a liquidator, operated by way of avoidance or extinguishment of the interest disclaimed and not by way of transfer or conveyance of that interest to any other person. There was no reason to regard a Crown disclaimer of a freehold as operating differently from that of a leasehold. It operated by way of extinguishment of the freehold estate such that the Crown became the owner of the land in question freed from the previous freehold interest, rather than by way of transfer of that freehold to the Crown. Thus the operation of the disclaimer as it related to the interest disclaimed was the same whether that interest was a freehold or a leasehold estate, even if the nature of the superior interest freed from that estate was different. That difference had no bearing on the matter. The rights removed from the company simply no longer existed to bind the Crown. Accordingly, Crown disclaimer of the freehold was not a “disposition” and the effect of restoration was that the freehold estate was retrospectively re-created and re-vested in the company in all respects as if it had never been dissolved and as if the freehold had never been disclaimed. It follows that it was just to make the restoration order and the power to do so should be exercised.
Amit Gupta (instructed by Gateley plc) appeared for the applicant; No other party appeared or was represented.
Eileen O’Grady, barrister
