Fivestar Properties Ltd, Re

The court granted the applicant bank's application to restore Fivestar Properties Ltd to the register and to wind it up, concluding that restoration retrospectively re-creates the company's title to a freehold which had been deemed bona vacantia and disclaimed by the Crown. The judge held that a Crown disclaimer operates by extinguishing the company's interest rather than by effecting a disposition which would defeat restoration under Companies Act 2006 s1034. Relevant statutory provisions considered included Sch B1 para 84 Insolvency Act 1986 and ss 1012–1017, 1029, 1031–1034 Companies Act 2006. The court relied on authorities dealing with the effect of disclaimer and restoration and applied the statutory scheme to hold that the freehold vests retrospectively in the company on restoration.

Background and parties: The Bank (West Bromwich Commercial Ltd) sought restoration of Fivestar Properties Ltd to the register and immediate winding up so that a freehold commercial property in Croydon (registered in the company's name and charged to the Bank) could be realised for the Bank as secured creditor. The company had been placed in administration, administrators filed a para 84 notice under Schedule B1 Insolvency Act 1986 and the company was dissolved. On dissolution the company's property became bona vacantia under Companies Act 2006 s1012, and the Treasury Solicitor disclaimed the Crown's interest.

Nature of the application: An application under Companies Act 2006 s1029 for restoration to the register (s1029(1)(b)) and consequential directions under s1032 and s1034 to place parties as nearly as may be in the position as if the company had not been dissolved.

Issues for decision:

• Whether restoration should be ordered and whether it was just to do so to permit realisation of the Property for the secured creditor.
• What effect Crown disclaimer of a freehold vested as bona vacantia has on the rights of the company on restoration — in particular whether disclaimer operates as a "disposition" for the purposes of s1034 so as to prevent retrospective re-creation of the company's estate.
• Ancillary questions about the position of subordinate interests, receivers and practical alternatives.

Court's reasoning and conclusion: The court accepted that the Bank had standing and that it was just to restore the company to enable realisation of the Property for the secured creditor. The statutory scheme treats property of a dissolved company as bona vacantia subject to possible restoration (ss1012, 1032). The court followed authorities (in particular Scmlla Properties Ltd v Gesso Properties (BVI) Ltd and Allied Dunbar Assurance plc v Fowle) in holding that a Crown disclaimer operates by extinguishment of the disclaimed company interest rather than by creating a transfer or disposition which would be effective to defeat restoration. Accordingly, a restoration order has the effect of retrospectively re-creating and re-vesting the freehold in the company as if it had never been dissolved or disclaimed. The court made the restoration order and consequential directions and noted alternative procedural routes that might avoid such issues in future.

The court ordered restoration of Fivestar Properties Ltd to the register and immediate winding up. The judge ruled that Crown disclaimer of the company's freehold does not amount to a disposition that prevents restoration; on restoration the freehold estate is retrospectively re-created and re-vested in the company as if it had never been dissolved or disclaimed. This justified granting the restoration order to allow realisation of the Property for the secured creditor.