All land in England ultimately belongs to the Crown. In a recent case which serves as something of a cautionary tale, a couple who were the directors and shareholders of a company that had owned a property when it was dissolved have been unsuccessful in their application for a vesting order in the property.
The company had purchased the freehold of the property for £60,000 in 2005. The property was divided into two flats, over which the couple acquired leases. However, annual returns had not been filed for the company and it was ultimately dissolved, with the result that the property reverted to the Crown.
The couple said that they had been unaware that failure to submit annual returns would lead to the company’s dissolution. They did not discuss the company’s fate for many years and had not known it had been dissolved. The six-year time limit for applying to restore the company to the Register having passed, the couple applied to the High Court for a vesting order in respect of the property under Section 1017 of the Companies Act 2006, or alternatively under Section 181 of the Law of Property Act 1925.
Considering whether it had jurisdiction to make a vesting order under Section 1017 of the Companies Act, the Court did not agree that the fact that the couple had been the shareholders in the company meant that they had an interest in its property. Nor did their having the benefit of landlord covenants under their leases to maintain the property gave them a sufficient interest in the freehold to enable a vesting order to be made.
The couple’s liabilities under their leases were burdens they had taken on when they acquired the leases: they were not liabilities in respect of the freehold per se. In any event, the liabilities were not of the same order of magnitude as the value of the freehold interest in the property, which would inevitably have increased since the company had acquired the property because the leases were 20 years closer to expiry.
The Court then turned to whether it could vest a new legal estate in the property under Section 181 of the Law of Property Act. The Court found that none of the couple’s rights as directors and shareholders constituted a subsisting legal right in the property at the date of the company’s dissolution. To attribute the company’s interest in the property to the couple because they were its shareholders would involve an unjustified piercing of the corporate veil.
Dismissing the application, the Court recognised that it would be highly convenient for it to be able to assist the former shareholders of dissolved companies in such situations. However, its conclusion was that its various statutory jurisdictions did not extend far enough to enable it to vest the freehold of the property in the couple.