Author
Alicia Convery

Alicia Convery

Associate

Read More
Author
Alicia Convery

Alicia Convery

Associate

Read More

10 October 2022

RED Alert - October 2022 – 5 of 5 Insights

Who’s the king of the castle? Court resolves dispute over castle ownership after dissolution of foreign corporate trustee

Summary

What happens to UK property when the foreign company that is holding UK land on trust is dissolved and then restored? The High Court was recently asked to determine this tricky question in Hamilton v Her Majesty's Attorney – General and others [2022] EWHC 2131 (Ch) and ultimately held that, in such circumstances, the freehold would vest in the Crown and the property would not automatically re-vest in the restored former trustee.

The facts

This case concerned a castle which had been most recently used by the claimant, Margarita Hamilton, as a venue for weddings. Ms Hamilton had previously owned the property between 1988 and 2013, following which it was transferred to a Guernsey registered company, Walton Properties Ltd (WPL), which held the castle on Trust.

WPL was dissolved in 2020 but subsequently restored to the Guernsey company register. On its restoration, WPL claimed that the castle had re-vested in itself. Alternatively, WPL argued that that a new legal title should be vested in it in accordance with section 181 of the Law of Property Act 1925 (LPA 1925), which grants the Court the power to vest a "corresponding estate" in the person who would have been entitled to the estate following the dissolution of a company.

Ms Hamilton challenged these claims and instead argued that the castle should be vested in her under the Trustee Act 1925 (TA 1925) on the basis that she was in occupation of the property and carried on a wedding venue business there. WPL argued that Ms Hamilton's claim should not succeed as she was unsuitable to act as trustee.

The decision

The three main issues before the Court were:

  • What was the effect of the dissolution and subsequent restoration of a foreign company on the devolution of land in England?
  • Was Ms Hamilton entitled to seek a vesting order?
  • In whom should the castle be vested?

On the first issue, the Court held that the law governing the devolution of freehold property in England should be English law and, as a result, the existing authorities on this issue for UK-incorporated companies should be applied. In particular, the Court held that, following dissolution of a company, any freehold land it owns should not pass to the Crown under the feudal process of "escheat" on the basis that the freehold interest has not in fact come to an end as the legal title to the property remains governed by the trust notwithstanding that the trustee entity has been dissolved. As a result, the freehold land should instead vest in the Crown, subject to the trust, therefore precluding the land from re-vesting in the former trustee or a new legal title being created.

The Court also held that Ms Hamilton had sufficient standing to bring a claim for a vesting order. In exercising its discretion to grant such an order, the Court concluded that the best approach would be for the castle to vest in Ms Hamilton on the basis that she was already in occupation of and was able to continue running a business from the premises. This was in contrast to WPL which was effectively controlled by the trustees in bankruptcy of its ultimate shareholder and who intended to sell the castle for the benefit of the bankrupt's creditors which would lead to the demise of Ms Hamilton's business.

Our comment

Whilst the position for corporate trustees incorporated in the UK was previously clarified in case law, this landmark decision helps dispel any uncertainty surrounding whether foreign registered companies would receive the same treatment. In light of this decision, it is clear that a recently restored foreign company will need to seek a vesting order under the TA 1925 and any attempt to create a new freehold under the LPA 1925 is bound to fail.

The case also provides useful guidance as to how a Court might exercise its broad discretion to grant a vesting order under section 44(ii)(c) TA 1925. In particular, the High Court helpfully confirmed that there is no obligation to reinstate the status quo as it stood before the former trustee's dissolution, especially where the wider circumstances of the case suggest that it would be more just and pragmatic to vest legal title in an alternative person.

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