In Alison Court Management Company Ltd v The Crown Estate Commissioners [2022] EWHC 2375 (Ch), the High Court has provided a useful summary of the test that must be satisfied when the court is asked to make a vesting order under section 181 of the Law of Property Act 1925.
Alison Court is a development consisting of nine flats that was built in the early 1990s. It was built on three parcels of land owned by a group of companies known collectively as Alath. Two of the freehold titles were owned by Alath Construction (Jersey) Ltd, a Jersey-registered company, and one freehold title was owned by Alath Construction Ltd, an England-registered company. The titles effectively overlapped in that the flats were not neatly built within the boundaries of each of the freehold titles. Consequently, some of the flats straddled more than one title.
Following the development of the flats and the creation of Alison Court, it was the intention of the directors of Alath that the freehold titles would be transferred to the claimant, Alison Court Management Company Ltd. The flats were then to be sold on long leases with each company owning a share in the claimant and a share in the freehold. Unfortunately, contrary to the belief of Alath’s solicitors at the material time, the transfer of the freehold was never effected.
Section 181(1) provides that “where, by reason of the dissolution of a corporation… a legal estate in any property has determined, the court may by order create a corresponding estate and vest the same in the person who would have been entitled to the estate which determined had it remained a subsisting estate”.
The power of the court to make a vesting order under section 181 is discretionary, but certain conditions must be satisfied. Firstly, by reason of dissolution the legal estate must be determined.
The court was satisfied that both Alath companies were dissolved in the mid-1990s. The land owned by Alath Jersey, being a foreign company, escheated to the Crown on its dissolution. In respect of Alath UK, its dissolution caused the land it owned to pass bona vacantia to the Crown. The Crown disclaimed the title in April 2010, meaning its land also passed escheat to the Crown, thereby engaging section 181.
The second condition required the claimant to establish its entitlement to the properties had there remained a subsisting estate. On the limited evidence available, the court was satisfied that there was no obvious other competing claim to the titles other than the claimant or the dissolved companies. Neither Alath Jersey nor Alath UK had been reinstated. On balance, there appeared to be an agreement that following completion of the development the freehold titles held by the Alath companies would be transferred to the claimant. The evidence suggests that the directors of the claimant and Alath believed that a transfer of the freehold titles had occurred and the claimant had assumed responsibility for the management of Alison Court.
An order vesting the freehold titles in the claimant was made.
Elizabeth Dwomoh is a barrister at Lamb Chambers
