Rolle Family and Company Limited v Rolle

A deed cannot be delivered in escrow on a condition that the grantee will later come into existence. Delivery of an escrow creates binding obligations immediately; a non-existent grantee cannot be bound, so purported delivery is only a revocable statement of intention. The relation-back doctrine operates only as needed to make an effective escrow work and cannot cure that defect.

Under the Companies Act, a company may adopt a written pre-incorporation contract by conduct signifying assent within a reasonable time. The time limit protects third parties and must be no longer than needed to decide and implement adoption. Eight and a half months was excessive. Equity cannot impose a trust inconsistent with that statutory scheme.

The appellant company claimed title to two plots of land under conveyances executed four days before the company was incorporated. It argued that the conveyances had been delivered in escrow, conditional on incorporation, or alternatively that they were validated by section 22 of the Companies Act.

The trial judge rejected the statutory argument and dismissed the action. On appeal, the company abandoned that argument and relied solely on escrow. The Court of Appeal dismissed the appeal. The central issues before the Board were whether delivery to a non-existent grantee could create a valid escrow and whether the company had adopted the transactions within a reasonable time.

1. Appeal dismissed. The Board advised that the company had no title to the two plots. Costs were payable to the respondent, subject to written submissions within 14 days.
2. An escrow is a deed delivered conditionally so that it does not become operative as a grant until the condition is satisfied. Whether delivery occurred on that basis depends on the maker’s objectively ascertained intention, inferred from the circumstances. The doctrine of relation back operates only for purposes necessary to give efficacy to the transaction. It does not retrospectively invalidate an escrow because the grantee did not exist at the date of delivery. The Board relied on Governors and Guardians of the Foundling Hospital v Crane [1911] 2 KB 367 at 377 and Security Trust Co v Royal Bank of Canada [1976] AC 503 at 517.
3. The fundamental difficulty was that delivery of an escrow creates legally binding obligations immediately. If the grantee did not exist when delivery was purportedly made, there was nobody to whom the grantor could be bound, even conditionally. There was therefore no valid escrow. The reasoning in Alan Estates Ltd v W G Stores Ltd [1982] 1 Ch 511 at 527F–G and Windsor Refrigerator Co Ltd v Branch Nominees Ltd [1961] 1 Ch 88 at 102–103 supported that conclusion.
4. Section 22 of the Companies Act provides a statutory mechanism for pre-incorporation contracts. The deeds purported to be written contracts, including because a deed may contain a bilateral transaction and an agreement may be in writing without being signed by every party. Payment of stamp duty and lodging the conveyances in the company’s name signified adoption, but the adoption occurred eight and a half months after execution. A reasonable time means the time reasonably required to decide whether to adopt and to take the necessary steps. The limit protects third parties and the person who acted before incorporation; it does not allow time merely to discover that a problem exists. The delay was well beyond reasonable.
5. The possible consequences for title as between Paul and Ena Rolle were left open because Paul was not a party. Equity could not impose a trust in favour of the company if that would contradict the statutory requirement of timely adoption.

1. Privy Council [2017] UKPC 35: dismissed the company’s appeal from the Court of Appeal.
2. Court of Appeal of the Commonwealth of the Bahamas: dismissed the appeal, rejecting the company’s escrow argument.
3. Trial judge: rejected the company’s section 22 argument and dismissed the action.