Mar 2016
Author: Nigel Cook
The company Fivestar had been placed into administration and owned a freehold property which had been charged to a secured lender. Following the administration the company was dissolved rather than being placed into administration. It is not clear why the administrators reached the conclusion that there would be no viable distribution justifying a subsequent liquidation. As a consequence the company’s freehold property became bona vacantia and property of the Crown. Subsequently the occupational tenant sought to obtain a new lease by application to the Crown which refused to grant a lease and instead disclaimed the property. From the judgment it appears that the Land Registry freehold title was never closed but that a note of the disclaimer made against the title. The secured mortgagee wished to exercise its power of sale and so applied for restoration of the company to the register and for it to be placed into liquidation. The lender also applied for an Order that the property be deemed re-vested in the company despite the Crown disclaimer.
Decision:
The Court made the Order restoring the company to the register and that declaring the freehold title should be retrospectively re-vested in the company as if it had never been dissolved.
The Court considered previous cases including Allied Dunbar Assurance plc v Fowle [1994] BCC 422. That case had confirmed that a leasehold title was revived despite a disclaimer by the Crown and in this case the Courts saw no reason to distinguish leaseholds and freeholds.
Comment:
As well as making the requested Orders the Court did comment upon what it saw as alternatives to the restoration process. They pointed out that the mortgagee’s security interest was not terminated by the Crown disclaimer and that, therefore, the power of sale and vesting the freehold title in a purchaser was unaffected. Curiously at around the same time a Scottish Court [ELB Securities] had refused to give equivalent relief requested in Fivestar and in that case the Court had attempted to distinguish the Allied Dunbar decision. The better view seems that the Allied Dunbar decision as followed in this case is safe. The Crown had the alternative of disposing of the property rather than disclaiming but presumably chose not to take that option in view of the secured creditors’ interest.
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