B e f o r e :
MR JEREMY COUSINS QC Sitting as s Deputy Judge of The Chancery Division ____________________
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Mr Philip Sissons (instructed by Messrs Ashfords, of Bull Wharf, Redcliffe Street, BRISTOL BS1 6QR) appeared on behalf of the Claimant The Defendant was not represented ____________________
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Mr Jeremy Cousins QC:
This is an application for summary judgment under CPR 24.2 for an order under section 181 of the Law of Property Act 1925, to vest in the claimant, Quadracolour Limited, a legal and beneficial freehold interest in the land, formally registered under title number SGL369600, of which Columbia (International) Limited ("Columbia"), was formerly the registered proprietor. Columbia has since been dissolved, and its interest is now escheat to the Crown. The application is in respect of the same interest as that which was vested in Columbia prior to Columbia's dissolution.
The application is put on two further alternative bases for the vesting of such an interest in the claimant; first, that there should be an order under section 3(5) of the Law of Property Act 1925, and, secondly, under section 44 of the Trustee Act 1925.
The background to this application, which is not opposed, is that Columbia, prior to 9 December 1997, was the registered proprietor of property known as Unit 2, Kangley Bridge Road, Lower Sydenham, London SE26. The property, until that time, was registered in Columbia's name under title number SGL369600 at HM Land Registry.
Pursuant to a transfer which was effective on 9 December 1997, part of the land, which formerly had belonged to Columbia, was transferred to the claimant. The land which was transferred was shown on a plan attached to the transfer, and the land transfer was edged red on that plan. A smaller parcel of land, edged green on that plan, to which I shall refer to as the green land, was retained by Columbia. That land was used, and has continued to be used,
as a car park.
The green land at the time of the transfer suffered from a contamination problem because chemical storage tanks containing solvents were located under the car park. The tanks leaked and the claimant did not wish to take the transfer of the green land until remedial works had been completed. However, ultimately the claimant had an interest in taking a transfer of the green land. Therefore, the transfer, by way of an option in respect of the green land, provided that in certain circumstances the claimant should be able to acquire that land.
Clause 10 of the transfer stated as follows:
The claimant's case is that the grant of the option had the effect of creating a registerable equitable interest in the car park for the benefit of the claimant which was duly registered. The evidence in the case, which had been obtained from Mr Matthew Robson, a director of the claimant, is that the land has consistently been used as a car park on the part of the claimant going back many years and, to the best of his knowledge, to the time when the land was acquired.
That evidence is confirmed by a statement from a Mr Terry Shannon who was employed by the claimant from 1992 until 2008. Mr Shannon says in his evidence that from about the end of March 2001, Quadracolour's staff used the car park as the company's own exclusive car parking area. The staff made sure no-one other than Quadracolour staff, or legitimate visitors to the company, were allowed to park on the car park. Anyone else who attempted to do so was turned away. So, there is good evidence with regard to the usage of the car park by the claimant over a period of many years.
From this material, and from the evidence of Mr Robson, I infer that the claimant would, on an indefinite basis, have continued to wish to use the car park for its purposes and to exercise the option conferred by the deed of transfer, were it able to do so, and if the conditions were satisfied.
On 5 February 2001, Columbia wrote to the claimant concerning final works on the tanks in the yard. There was reference to a conversation which had taken place with a Mr Grima, a former director of the claimant. The author of the letter from Columbia, a Mr Wilby, said that he was pleased to be able to inform the claimant that the level of contamination in the water sample taken from under the building in October of the previous year had indicated that the relevant contaminants had been removed and he gave further confirmation in similar terms in relation to other related contamination. He went on to state that further contaminated water had been extracted although it was considered that no further general removal was necessary. He also enclosed supporting analytical data in respect of that matter.
The letter continued:
Then, on 26 February 2001, Mr Wilby wrote to Mr Grima again, confirming that the pumping out and cleaning of the tanks had been completed, and that in a further couple of weeks the foam injected into the tanks would be completely set. He expressed the view that there would be no further need for Columbia personnel to be involved with it. The "it" I take to be referring to the process of doing anything that was necessary, in terms of practical activity, to complete the handover of the yard to the claimant.
The letter proceeded to state that Mr Martin Rees, the financial director of Columbia, would be in touch shortly to tie up any loose ends. The letter then continued:
One further point arises. If you tarmac the yard, please do not do so in the area where our tankers unload. If this is coated, any spill that may occur will attack it, turning it very sticky and could lead to problematical environmental contamination."
It is true to say that neither of those letters actually addressed clause 10 of the transfer in terms. There was no formal notice that Columbia no longer required the use of tanks, but in my judgment, the manner in which Columbia expressed itself was only consistent with that understanding. The tanks, after all, had been filled so that they were no longer usable on the part of Columbia. Columbia had done that with a view to handing over the land to the claimant.
On 16 November 2004, Columbia was struck off the Register of Companies pursuant to the provisions section 652(5) of the Companies Act 1985, and on 23 November 2004, it was dissolved by notice in the London Gazette.
Upon the dissolution of Columbia its assets became subject to the provisions of section 654(1) (since repealed) of the Companies Act 1985, which provided as follows:
However, under the 1985 Act, the Crown could disclaim the interest which so arose and in this case, the Crown did so by notice of disclaimer given under section 1013 of the Companies Act 2006, which was a statutory provision then in force when the notice of disclaimer was given on 16 May 2012.
The effect of the notice of disclaimer given is set out in sections 1014 and 1015 of the 2006 Act. Where notice of disclaimer is given, the property concerned is deemed not to have vested in the Crown under section 1012, and under section 1015 the disclaimer operates so as to terminate, from the date of the disclaimer, the rights interests and the liability of the company in or in respect of the property disclaimed.
Counsel for the claimant, Mr Philip Sissons, in his helpful submissions this morning, drew to my attention the decision of Mr Stanley Burnton QC, as he then was, sitting as a Deputy Judge of the Chancery Division in the case of Scmlla Properties Limited v Gesso Properties (BVI) Limited [1995] BCC, page 793. In that case, the learned deputy judge considered with great care the authorities with regard to the law of escheat and, in particular, the position upon disclaimer. That case, I should add, was concerned with disclaimer by a liquidator. The learned deputy judge said, at page 804:
The principle of nulle terre sans seigneur referred to at p. 34 of Megarry & Wade, in the sentence cited above, compels the same conclusion. After the conclusion of oral argument in this case, Mr Thom brought to my attention the recently reported decision of the Privy Council in Ho Young v Bess [1995] 1 WLR 350 . In that case the Privy Council stated at p. 355E, 'the general proposition that the law abhors a vacuum and that title to land must always be in someone, whether the Crown or a subject', and on the basis of that proposition decided, consistently with A-G v Parsons , that the words 'shall be forfeited' in the statute under consideration meant 'shall be liable to be forfeited' and did not operate so as automatically to forfeit land to the Crown. Since disclaimer of a freehold ipso facto determines the company's interest in the land, this general proposition requires title on disclaimer to be immediately and automatically in the Crown."
The deputy judge went on to say that any doubt that he might otherwise have had was resolved by the terms of the Crown Estate Act 1961, section 8(3), the terms of which I need not refer to in this judgment.
Mr Sissons also drew my attention to what was said in Scmlla a little later in the judgment at page 805:
He continued:
In my judgment, any peculiar problems attaching to the Insolvency Act to which the learned deputy judge referred do not stand in the way of the principle that there has been an automatic escheat in the circumstances of this case. That, I find, is the status of the land.
By an e-mail of 6 June 2012, the claimant's solicitors made contact with the solicitors for the Crown Estate Commissioners, the defendant in this application. The e-mail recited the history of the acquisition of the red land and explained the desire of the claimant to acquire the green land. The e-mail concluded by indicating that the solicitors concerned would be grateful if the defendant could commence investigation into the property and advise the terms on which the claimant could acquire it for the Crown.
That inquiry produced a response on behalf of the defendant to the effect that the Crown Estate does not propose to take any action which might be construed as an act of management, possession or ownership in relation to the green land since to do so might incur upon it liabilities which the property is or might become encumbered. That was plainly, from the terms of the correspondence, sent on behalf of the defendant its standard position.
The response on behalf of the defendant continued:
It is by reason of that suggestion that the claimant has included in its application for summary judgment, and in its Particulars of Claim, an alternative claim for relief under the Trustee Act 1925, section 44.
Following on from that, the claimant's solicitors drew to the attention of the defendant's solicitors the decision of Mr Justice Woolf in UBS Global Asset Management (UK) Ltd v Crown Estate Commissioners [2011] EWHC 3368, to which decision I was taken to this morning by Mr Sissons, and to which I shall return a little later in this judgment.
The effect of the communication to the defendant's solicitors, in which that authority was mentioned, was to point out that in the light of Mr Justice Roth's decision, reliance upon the suggestion that there was a subsisting trust was misplaced, but the defendant's solicitors did not wish to be drawn upon that point for understandable reasons. Nonetheless, in subsequent correspondence from Messrs Burges Salmon, acting on behalf of the Crown Estate, it is perfectly apparent that there is no objection to the relief that is sought on behalf of the claimant today and I need not refer further to that correspondence.
It is in those circumstances that the claimant invites the court to make an order under the Law of Property Act 1925, section 181(1), which provides:
By virtue of the statutory provisions and the authorities to which I have referred earlier in this judgment, it is perfectly clear that the legal estate which previously vested in Columbia has determined. The question which, therefore, has to be considered arises under the second limb of the subsection; namely whether the court should create a corresponding estate and vest the same in the claimant, and whether the claimant would have been entitled to the estate which determined had it remained a subsisting estate.
This problem was considered in the UBS case which was factually quite similar to the present case. In that case, a company, which was an overseas company, called Aramis Properties Incorporated, granted, in May 2003, a long leasehold interest of property to the claimant in that case. Aramis subsequently granted an option to purchase a freehold to the tenant and that option was exercisable during the 21-year period for the price of £1.00. In 2009, the tenant sought to exercise the option by written notice to Aramis's London office but the letter was returned undelivered and it transpired that Aramis had been struck off the Register and dissolved in the British Virgin Islands on1 November 2004.
Mr Justice Roth explained that there was a significance in the fact that Aramis was an overseas company, in that if its freehold had been held by an English company then its real property interests would have vested in the Crown as bona vacantia pursuant to what is now section 1012 of the 2006 Act, but that was not the case with an overseas company to which the Companies Act did not apply. Accordingly, in the UBS case, the feudal law of tenure continued to be relevant so the land was escheat to the Crown. His lordship, therefore, went on to explain the nature and effect of escheat and referred to the decision in Scmlla. I need not do so again.
In the present case, of course, the position is not quite as straightforward as it was in the UBS case because Columbia was not an overseas company and, therefore, there is no escheat arising upon dissolution of the company. However, for reasons which I have given earlier in this judgment, ultimately there nevertheless arose an escheat and, therefore, the position in this case is, for all practical purposes, entirely comparable to the position in the UBS case.
In the UBS case, Mr Justice Roth dealt with the suggestion that the land was held on trust where a similar point that raised in this case was suggested on behalf of the Crown Estate. His lordship referred to the of the decision of the Court of Appeal in Wood Preservation Ltd v Prior (Inspector of Taxes) [1969] 1 WLR 1077 in connection with the question of whether the land, the subject of an option, was to be taken as held on trust by the grantor of the option. Wood Preservation was not a case concerned with an option over the land but Mr Justice Roth held that Wood Preservation did not drive him to the conclusion that land, the subject of an option, was to be regarded as held on trust by the grantor.
In particular, in reaching the conclusion that the land was not so held, Mr Justice Roth referred to the decision of the House of Lords in Jerome v Kelly [2004] 1 WLR 1409 to the speech of Lord Walker, with whose speech Lords Nicholls, Scott and Brown agreed. Mr Justice Roth drew attention to what Lord Walker said at paragraph 32 in that case and in particular the following passage:
Mr Justice Roth concluded that there was no basis for holding that the land in the UBS case was held subject to a trust. I gratefully adopt his reasoning and I reach the same conclusion in this case.
There is, therefore, I conclude, no impediment to consideration of the question posed by the second limb of section 181(1) of the Law of Property Act 1925.
In paragraph 20 of his judgment in the UBS case, Mr Justice Roth referred back to section 181(1) and pointed out that it was not inevitable that the court would exercise its power conferred by that subsection. But he said that in the circumstances of that case, it would be clearly appropriate for the court to do so. He said that the claimant had complied so far as he was able with the conditions of the option agreement by seeking to exercise the option. Had Aramis continued to exist, the freehold would, therefore, have passed to the claimant in that case. The Crown Estates Commissioners who held land pursuant to the escheat did not object to the court's making of a vesting order. He referred to the letter concerned. He continued that there was no basis for impugning the option agreement, and he said that the claimant had acted in good faith throughout and he, therefore, proposed to make that order as sought.
In the course of argument this morning, I raised with Mr Sissons whether it could be said that in this case had the interests of Columbia not determined, the claimant would have been entitled to the estate which had determined because, of course, it has not been possible for the claimant to go through all of the procedure as provided in the transfer for the exercise of the option.
Mr Sissons argued, and in my judgment was correct to do so, that the claimant would have been entitled to the estate because once Columbia no longer had any need for the tanks (as I have held that it did not), Columbia would have been bound to perform its obligations under the option had the claimant taken the necessary steps. Mr Sissons argued further that the material before the court quite clearly demonstrates that the claimant would have, but for the dissolution of Columbia, gone through all necessary steps so as to exercise the option and would, thereupon, undoubtedly have been entitled to the conveyance to it of the green land.
It seems to me to be perfectly clear that but for the intervening dissolution of Columbia in those circumstances, the claimant would have been entitled to the estate which has, in fact, determined because the claimant would have followed the necessary procedure.
In those circumstances, I am satisfied that the provisions of the section are fully engaged and that an order should be made under section 181(1) of the 1925 Act.
That leaves just one outstanding matter that I should deal with, albeit briefly, and that is the alternative claim which was advanced on the grounds of adverse possession of the green land by the claimant. I raised with Mr Sissons the question of whether the evidence in respect of adverse possession was sufficient to satisfy the guidance given in the decision of Mr Justice Slade, as he then was, in Powell v McFarlane [1979] P&CR, 452 as to what evidence there must be before the requirements of the law as to adverse possession will be satisfied. I pointed out to Mr Sissons that on the evidence as it is before me, I had doubt as to whether or not the requirements outlined in Powell v McFarlane had been satisfied. Very realistically, Mr Sissons indicated that if the court were minded to make an order under section 181, as I indicated I was so minded, that he would not wish to press the alternative ground on the basis of adverse possession.
In those circumstances it is not necessary for me to make any findings in the alternative with regard to the adverse possession claim. I shall, therefore, make an order under section 181 of the Law of Property Act 1925.