Edward Francis considers the effect of dissolution and restoration of overseas companies on their title to property in England and Wales.
According to data compiled by HM Land Registry, there are approximately 95,000 properties in England and Wales which are registered in the name of overseas companies, two thirds of which are in the Crown dependencies (Isle of Man, Jersey and Guernsey) and the British Virgin Islands. What happens to the ownership of its property situate in this jurisdiction when such a company is dissolved in the place of its incorporation? And what is the position in the event such company is subsequently restored to life?
The conundrum as it arose in Hamilton v Attorney-General
The High Court recently had to consider these questions in Hamilton v HM Attorney-General [2022] EWHC 2132 (Ch). In that case, a Grade II-listed castle in Clevedon, Somerset was registered in the name of a Guernsey-registered company, Walton Properties Ltd, which held the property on trust of land for itself and the claimant, Margarita Hamilton. WPL was struck off the Guernsey register and dissolved in May 2020 as a result of the failure to file statutory returns following the bankruptcy of its ultimate owner, Roderic Hamilton.
The position was rectified in May 2021 when WPL was restored to the Guernsey register on the application of Mr Hamilton’s trustees in bankruptcy. However, in the meantime, Mrs Hamilton had applied to the High Court for a vesting order under section 44(ii)(c) of the Trustee Act 1925 vesting legal title to the property in herself subject to the existing trust. That claim was opposed by Mr Hamilton’s trustees, and, following its restoration, by WPL itself.
It contended that the claim was rendered redundant by its restoration which had the effect of automatically revesting the property in itself without the need for any further action or order. If that was wrong, it further contended that the court should make an order under section 44(ii)(c) revesting legal title to the property in it, rather than Mrs Hamilton, in effect to restore the status quo ante. Mrs Hamilton in turn opposed any order revesting legal title to the property in WPL, among other reasons, as it was necessary to redeem the existing mortgage over the property held in WPL’s name and replace it with an on-shore mortgage facility.
The critical question of principle was that of the effect of WPL’s dissolution and subsequent restoration to the Guernsey register. If the effect of its dissolution was that it was divested of its property in this jurisdiction, was such property automatically revested in it on its restoration, or did this require a further order of the English court?
The law as it applies to UK registered companies
The position would have been straightforward in the case of a UK registered company, governed by the Companies Act 2006:
- On its dissolution, its property situate in England would have vested in the Crown, in the case of property not held on trust as bona vacantia pursuant to section 1012 of the 2006 Act, but otherwise at common law following In re Strathblaine Estates Ltd [1948] Ch 228.
- On its restoration, such property would automatically revest in the company by operation of section 1032 of the 2006 Act. Under that section, the company is deemed to have continued in existence as if it had not been dissolved or struck off the register (the so-called “as you were” provision), and the former property of the company which had vested in the Crown on its dissolution thereupon revests in the company, unless in the meantime it has been disposed of (where the position will be governed by section 1034 of the 2006 Act): see generally Re Fivestar Properties Ltd [2015] EWHC 2782 (Ch); [2015] PLSCS 277.
The position as regards overseas companies
But the position is more complicated as regards overseas companies. They are not governed by the 2006 Act, with the result that neither section 1012 nor section 1032 are of any application. In the case of the Crown dependencies, the companies legislation governing the place in which the company is incorporated contain provisions as to the effect of dissolution and restoration of the company which broadly mirror those of the 2006 Act (or its predecessor, the Companies Act 1985), but these statutory provisions do not have extra-territorial effect in relation to immovable property owned by the company situate elsewhere. Instead the position is governed by the lex situs, the law of the place where the property is situate, as noted by Lewison LJ in Rock Ferry Waterfront Trust v Pennistone Holdings Ltd [2021] EWCA Civ 1029; [2021] EGLR 41. In the case of property situate in England and Wales, this is the common law.
What then is the position under the common law? The effect of dissolution of an overseas company will depend on the nature of the property, but in broad terms the property will pass to or vest in the Crown:
- In the case of freehold property not held on trust, the dissolution of the company will result in the property passing by escheat to the Crown, as set out in UBS Global Asset Management (UK) Ltd v Crown Estate Commissioners [2011] EWHC 3368 (Ch); [2011] PLSCS 151; as explained in Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] EGCS 52, this involves the extinction of the freehold title:
- In the case of freehold property held on trust, the dissolution of the company will result in the legal title vesting in the Crown, following Strathblaine
- In the case of leasehold property, the dissolution of the company will result in the leasehold estate vesting in the Crown, following In Re Wells [1933] Ch 29.
In contrast, there is little authority which deals with the effect of restoration of an overseas company. In Lizzium Ltd (a company inc. in Jersey) and another v Crown Estate Commissioners [2021] EWHC 941 (Ch); [2021] PLSCS 81, Master Clark held (i) that the effect of restoration of an Isle of Man company was not automatically to revest in it its former freehold property situate in England which had passed to the Crown by escheat but (ii) that it was appropriate to make an order under section 181 of the Law of Property 1925 creating a new freehold estate in the property to be vested in the restored company. However, it does not appear that any argument was put before the court to the contrary on the first, key proposition with which we are concerned.
The decision in Hamilton
The judge in Hamilton, Deputy Master Raeburn, had little difficulty in finding that the property had vested in the Crown subject to the trusts on which it had been held by WPL, applying Strathblaine.
But what was the effect at common law of WPL’s restoration? Mrs Hamilton relied on Lizzium in support of her submission that there was nothing at common law which would operate to effect an automatic revesting of the property in WPL on its restoration.
WPL attempted to side-step the problem in two ways: first, it argued that it was and had at all times remained the registered proprietor of the property, and that this was conclusive of its title under section 58 of the Land Registration Act 2002; second, it contended that the court should apply directly or by analogy the “as you were” provisions of the Guernsey company legislation which mirrored those in section 1032 of the 2006 Act, in particular having regard to the fact that Guernsey was a Crown dependency.
In his judgment, the judge rejected WPL’s arguments and held that the property remained vested in the Crown notwithstanding WPL’s restoration.
The fact that WPL had remained the registered proprietor of the property was not conclusive of its title to the property, since it was expressly provided under section 27(5) of the 2002 Act that the vesting of property in the Crown following dissolution of a corporate proprietor took effect notwithstanding the absence of registration. And because the devolution of property in England and Wales was governed by the lex situs, there was no scope to apply the “as you were” provisions of the Guernsey company legislation, whether directly or by analogy.
He agreed with Mrs Hamilton that there was nothing at common law which would operate automatically to revest the property in WPL. Instead, that would have to be effected by order of the court, either under section 44(ii)(c) of the Trustee Act 1925, or (in the case of property which had passed to the Crown by escheat) under section 181 of the Law of Property Act 1925.
As a postscript, the judge had then to consider whether to grant an order vesting legal title in the property in Mrs Hamilton, or whether instead in WPL. Applying what he considered to be a broad discretion which should be exercised in a pragmatic way (following Potier v Treasury Solicitor (Bona Vacantia) [2021] EWHC 1524 (Ch)), he held that legal title should be vested in Mrs Hamilton for the reasons set out in his judgment.
What follows from the decision?
The case highlights a potential problem which may affect the title to a considerable number of properties in England and Wales held by overseas companies which have been dissolved and subsequently restored without any thought being given to the question of revesting of title.
In most cases, it will be a problem which lies dormant and there may be no reason why it would be stirred. However, if it needs to be addressed, it should in many cases be straightforward to apply to the court for a vesting order under section 44(ii)(c) of the Trustee Act 1925 or an order under section 181 of the Law of Property Act 1925 to revest title in, or create a new title in the property in favour of, the restored company, or in other persons beneficially entitled to the property.
Edward Francis is a barrister at Enterprise Chambers and appeared for the successful claimant in Hamilton
