Re Charlotte Street Properties Limited

The Court of Appeal allowed the appellant's appeal and dismissed the administrators' application under section 234 of the Insolvency Act 1986. The court held that the High Court judge was wrong in principle to impose a constructive trust or other equitable assignment of the benefit of the 1999 sale contract in favour of CSP on the facts of this case.

Key legal principles applied were: (i) the scope and summary nature of s.234 IA 1986 as a procedural power to obtain property which the company "appears to be entitled" to, not a substitute for full resolution of title disputes; (ii) established authorities that an uncompleted contract gives rise to equitable consequences between the original contracting parties (vendor as constructive trustee sub modo) but does not create proprietary rights enforceable against the vendor by a sub-purchaser without compliance with the contract; and (iii) the requirement that contractual mechanisms for completion (notably the notice provisions in clause 6.2 of the 1999 Agreement and the comparable clause in the 2003 Agreement) must be observed.

The court also held that post-judgment assignment of the 1999 Agreement and service of a clause 6.2 notice could not be admitted on appeal to cure defects in the administrators' case; the administrators should have effected any assignment and served any notices before trial and, if they wish to rely on a later assignment/notice, must commence fresh proceedings.

This was an appeal from HH Judge Halliwell's judgment ([2019] EWHC 1722 (Ch)) granting administrators' relief under s.234 IA 1986 to obtain transfers of six Greater Manchester properties registered in the name of Mr Jacob Ezair. The properties had been the subject of a 1999 agreement under which Mr Ezair sold his business to Northern Estates Limited (NEL) but the transfers of the properties were to "rest in contract" under clause 6.2, and a 2003 onward sale from NEL to Charlotte Street Properties Limited (CSP) left legal title in Mr Ezair pending completion.

Parties and procedural posture:

• Appellant: Jacob Azouri Ezair (registered proprietor of the properties).
• Respondents: Stephen Leonard Conn and Jonathan Avery-Gee (joint administrators of CSP).
• Administrators applied under s.234 IA 1986 and s.39 Senior Courts Act 1981 for orders compelling execution of TR1 transfers or for a judge to execute transfers.
• Preliminary and interlocutory stages included a District Judge preliminary issue and a hearing before HH Judge Eyre QC. The substantive application was tried before HH Judge Halliwell, who found for the administrators and ordered transfer; this appeal followed.

Issues identified:

• Whether CSP was the beneficial owner of the properties such as to entitle it to immediate transfer of the legal estate without serving contractual notices under the 1999 and 2003 agreements.
• Whether equitable doctrines (constructive trust, estoppel, conversion) could be used to treat NEL's or CSP's rights as assigned so as to enable CSP to call for transfer free of the contractual notice mechanism.
• Whether s.234 provided an appropriate summary route to the relief sought where title issues were contested.
• Whether post‑judgment events (assignment of the 1999 Agreement and a later clause 6.2 notice) could be relied on in the appeal.

Court's reasoning and conclusion:

• The Court of Appeal emphasised that s.234 is procedural and facilitates the office-holder in obtaining property which the company "appears to be entitled" to; it is not a substitute for a full hearing to resolve complex title disputes or for specific performance proceedings when contractual enforcement is necessary.
• The court analysed the 1999 and 2003 contracts and relevant authorities (including Southern Pacific Mortgages v Scott, Berkley v Poulett, Lysaght v Edwards and Jerome v Kelly). It held that a purchaser under an uncompleted contract acquires equitable rights against his vendor which are governed by the contract and that those equitable rights do not give the sub-purchaser proprietary rights against the original vendor unless the contractual mechanism has been complied with or a legal assignment has been effected.
• The judge below was wrong to find that equitable estoppel or a constructive trust had effectively assigned the benefit of the 1999 Agreement to CSP so as to negate the contractual notice provisions. Even accepting some admissions in witness statements, those did not establish a binding constructive-assignment that avoided the need for contractual notice and for the required assignment procedures under the Law of Property Act 1925.
• The Court refused to admit and rely on the post-judgment assignment and notice on appeal because the administrators had ample opportunity to effect those steps before trial and it would be unfair to the appellant to treat fresh material as curing the administrators' case on appeal.

Result: appeal allowed; the s.234 application dismissed. The Court of Appeal directed that if the administrators wish to rely on the later assignment/notice they should commence new proceedings.

Appeal allowed. The Court of Appeal held that the High Court judge erred in principle in treating the circumstances as giving rise to an equitable assignment or constructive trust of the benefit of the 1999 Agreement in favour of CSP such as to permit transfer of legal title without compliance with the contractual notice provisions. Section 234 IA 1986 is a procedural power and cannot be used to bypass contractual mechanisms for completion; post-judgment assignment and notice could not be admitted on appeal to cure defects in the administrators' case. The s.234 application was therefore dismissed.

Appeal from High Court of Justice, Business and Property Courts in Manchester, Companies and Insolvency List (ChD), HH Judge Halliwell, [2019] EWHC 1722 (Ch). Preliminary procedural steps included a District Judge preliminary issue and a hearing by HH Judge Eyre QC on the scope of s.234. Administrators appointed 16 October 2017; application issued November 2017; judgment in this Court handed down 1 June 2020 ([2020] EWCA Civ 687).