Conn & Anor v Ezair, Re Charlotte Street Properties Ltd

Section 234 of the Insolvency Act 1986 is procedural and does not enlarge a company’s proprietary rights. It may require transfer of property where the company appears entitled to the relevant right or interest. A sub-purchaser does not acquire a new proprietary interest merely by entering into a sub-sale, but may acquire the intermediate purchaser’s equitable interest when properly transferred or held on bare sub-trust. A legal owner who has facilitated the transaction and acknowledged the beneficial ownership may be estopped from denying it. Once the purchase price is paid and no active trust duties remain, the beneficiary may require transfer of legal title. Relief under section 234 remains discretionary, but procedural complexity and a potential trustee’s lien did not justify refusing relief on the evidence.

The joint administrators of Charlotte Street Properties Ltd applied under section 234(2) of the Insolvency Act 1986 for an order requiring Jacob Ezair to transfer the registered titles to six properties. Ezair had acquired the properties personally, agreed in 1999 to sell the wider portfolio to Northern Estates Ltd, and in 2003 Northern Estates agreed to sell eight properties, including those in issue, to the Company. The consideration had been provided, but legal title remained registered in Ezair’s name.

Ezair initially admitted that the Company had acquired beneficial ownership and that he held the properties on trust for it, but later sought to withdraw those admissions. The issues included whether withdrawal should be permitted, whether the Company had sufficient contractual or equitable rights despite the absence of formal transfers and completion notices, whether Southern Pacific Mortgages v Scott prevented the claim, and whether relief should be refused as inappropriate or prejudicial.

1. Admissions. The admissions that the Company had stepped into NEL’s shoes and that Ezair held the properties on trust for it were clear admissions within CPR 14.1. Permission to withdraw them was refused because the proposed withdrawal followed legal or tactical reassessment rather than new evidence, was sought very late, would prejudice the Administrators, and was inconsistent with the interests of justice.
2. Section 234. Section 234 of the Insolvency Act 1986 is procedural only. The Administrators had to show that the Company appeared entitled to property within section 234(2), and that the relevant right or interest supported the transfer sought. The wide definition of property in section 436(1) included contractual and equitable interests.
3. Equitable ownership and estoppel. The 1999 Agreement, for which NEL had supplied the consideration in full, left Ezair holding the properties on bare trust for NEL. The 2003 transaction was intended to pass beneficial ownership to the Company. Ezair controlled or facilitated both companies, arranged for the Company to assume the loan liabilities, treated the properties as Company assets, and collected rents for it. He was therefore estopped from denying that NEL’s rights had been assigned to the Company.
4. Southern Pacific Mortgages v Scott. That decision concerned the creation of new rights by a purchaser before acquisition of the legal estate. It did not prevent the transfer of an existing equitable interest, or the operation of constructive trust, conversion or estoppel where the intermediate purchaser’s rights had passed to the sub-purchaser.
5. Notice and transfer. The October 2017 letter satisfied clause 6.2 of the 1999 Agreement. Ezair was consequently obliged, as bare trustee, to transfer the properties. Alternatively, the Company could seek specific performance through the contractual chain without generally joining the intermediate party.
6. Discretion and disposal. Relief was not refused merely because section 234 proceedings were summary, title issues might overlap with later accounting proceedings, or Ezair asserted an indemnity or lien. The evidence did not establish that his entitlement exceeded the rents collected, and the substantial equity justified immediate transfer. An order was made requiring Ezair to transfer the properties to the Administrators.