Factual and Procedural Background
The Claimant seeks a declaration affirming its entitlement to a legal mortgage over leasehold property located at 3A-3B Defiant Close, Hawkinge, Folkestone, Kent ("the Property") following the dissolution of the mortgagor, Company A. The Claim Form also includes a claim for an order restoring Company A to the Register of Companies and, alternatively, a vesting order under Section 1017 of the Companies Act 2006. The Registrar of Companies administratively restored Company A to the Register after proceedings commenced, rendering the order for restoration unnecessary. However, the restoration occurred after the Treasury Solicitor filed a notice of disclaimer, raising questions about the disclaimer's effect.
At the hearing, Attorney Smith appeared for the Claimant. The Defendants did not attend. Company A was not a party at the commencement of proceedings, as it was not in existence then, and has not been formally joined since. The court ordered that notice of the judgment be served on Company A, which will have 28 days to apply for variation or setting aside of the judgment and seek directions under Section 1032(3) of the Companies Act 2006.
The Property's registered leasehold title derives from a lease dated 25 April 2016 between Company B and Company A for 999 years at a nominal rent. The Claimant, a specialist provider of vehicle purchase finance, advanced funds in December 2017 to another company (Buzzlines Travel Limited) and took a legal charge over the Property from Company A securing Buzzlines Travel's indebtedness. Buzzlines Travel defaulted and entered insolvent liquidation.
Company A was struck off the Register and dissolved at the end of 2019 and early 2020. The Treasury Solicitor filed a notice of disclaimer around mid-March 2020 but served it on the Claimant only in May 2020, prompting the Claimant to commence proceedings in June 2020. A former director applied for administrative restoration in July 2020, and Company A was restored before the hearing.
Legal Issues Presented
- Whether the Claimant remains entitled to the legal mortgage over the Property following the dissolution and disclaimer by the Crown.
- Whether the Crown's disclaimer took effect given the timing of notice and the Claimant's application for a vesting order.
- Whether the Property automatically re-vested in Company A upon its restoration to the Register of Companies.
- The legal effect of the statutory framework governing bona vacantia, Crown disclaimer, and restoration of companies under the Companies Act 2006 on leasehold property and third-party rights.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Hastings Corporation v Letton [1908] 1 KB 378 |
Lease of land vested in a company ended on dissolution, accelerating reversion to landlord. |
Historical context for treatment of leasehold property on company dissolution. |
| Scmlla Properties Ltd v Geso Properties (BVI) Ltd [1995] BCC 793 |
Effect of Crown disclaimer on freehold title and escheat principles. |
Confirmed that disclaimer of freehold title leads to escheat under common law. |
| Hindcastle Ltd v Barbara Attenborough Ltd [1997] AC 70 |
Lease disclaimer under Insolvency Act does not extinguish third-party rights; similar effect under Companies Act 2006. |
Key authority establishing that disclaimer does not affect third-party rights such as mortgagees. |
| Allied Dunbar Assurance plc v Fowle [1994] BCC 422 |
Disclaimer operates by avoidance, not disposition; liability of sureties revived on restoration. |
Supported view that disclaimer does not survive restoration; disclaimer is not a disposition. |
| Stacey v Hill [1901] 1 KB 660 |
Precedent overruled by Hindcastle regarding surety liability post-dissolution. |
Referenced as historical precedent overruled by later authority. |
| ELB Securities Limited v Love [2015] CSIH 67 |
Restoration of Scottish company does not revive disclaimed lease; statutory provisions interpreted narrowly. |
Court of Session decision distinguished by the court due to differing statutory regimes. |
| Re Fivestar Properties Ltd [2016] 1 WLR 1104 |
Confirmed disclaimer is not a disposition; restoration re-vests freehold estate. |
Followed Allied Dunbar reasoning for freehold land. |
| Re Carrowreagh Management Company [2018] NICh 18 |
Restoration re-vests freehold title notwithstanding Crown disclaimer; favored Allied Dunbar approach. |
Preferred English and Northern Ireland approach over Scottish decision. |
| Spiro v Glencrown [1991] Ch 537 |
Unilateral exercise of option not a statutory disposition of property. |
Used to illustrate interpretation of "disposition" in property law context. |
Court's Reasoning and Analysis
The court began by examining the common law and statutory framework governing the effect of company dissolution on leasehold property, focusing on the provisions of Part 31 of the Companies Act 2006. Historically, leasehold interests vested in a company ended on dissolution, but statutory reforms vested dissolved companies' property in the Crown as bona vacantia, subject to disclaimer rights.
The court analysed the effect of the Crown's disclaimer under Sections 1013 and 1015 of the Companies Act 2006, which terminates the company's rights in disclaimed property but does not affect third-party rights except to release the company from liability. This aligns with the Insolvency Act 1986's treatment of lease disclaimers, as established in Hindcastle Ltd v Barbara Attenborough Ltd.
Applying this principle, the court held that the Claimant's legal mortgage rights survived the Crown's disclaimer, as the disclaimer did not extinguish third-party rights such as those of mortgagees.
The court then considered whether the Crown's disclaimer took effect under Section 1016(1), which requires notice to all persons claiming under the company and a 14-day period for applications for vesting orders. Since the Claimant received notice less than 14 days before commencing proceedings including a vesting order application, the disclaimer could not have taken effect.
On the alternative hypothesis that the disclaimer did take effect, the court examined whether the Property automatically re-vested in Company A upon restoration under Sections 1028 and 1032. The court relied on a trilogy of High Court decisions (Allied Dunbar, Re Fivestar Properties, and Re Carrowreagh Management Company) holding that disclaimer operates by avoidance, not disposition, and restoration deems the company never dissolved, thus re-vesting property in the company.
The court distinguished the contrary Scottish authority in ELB Securities Limited v Love, noting differences in statutory regimes and lack of adoption of that decision in England and Wales.
Finally, the court concluded that the Property re-vested in Company A upon restoration and that statutory provisions for bona vacantia and Crown disclaimer do not derogate from the effect of restoration.
Holding and Implications
The court DECLARED that the Crown's disclaimer did not take effect because the statutory notice and delay requirements under Section 1016(1) of the Companies Act 2006 were not satisfied. Alternatively, if the disclaimer had taken effect, the leasehold title to the Property automatically re-vested in Company A upon its restoration to the Register of Companies.
The court also declared that the Claimant's legal mortgage (the 2017 Charge) remains vested in the Claimant.
The decision directly affects the parties by affirming the Claimant's continuing mortgage rights and clarifying the effect of company restoration on leasehold property subject to Crown disclaimer. No new precedent was established beyond the application and confirmation of existing authorities and statutory interpretation.