Mistral Asset Finance Ltd v Registrar of Companies & Anor

The claimant sought a declaration that its legal mortgage (the 2017 Charge) over leasehold property survived the dissolution of the mortgagor company and any Crown disclaimer and that, alternatively, the property re-vested in the company on administrative restoration. The court held that the Crown's disclaimer did not take effect because section 1016(1) of the Companies Act 2006 required prior service and a 14-day period in which an application for a vesting order could be made; the claimant had issued proceedings within that period seeking a vesting order. The court also held that, on restoration, the company's title re-vested in the company under sections 1028 and 1034 of the Companies Act 2006 and, in any event, the claimant's rights as mortgagee persisted under section 1015(2) and established authorities (notably Hindcastle).

Accordingly the court declared that the Crown disclaimer did not take effect and that the 2017 Charge remains vested in the claimant. The judgment relied on the statutory scheme in Part 31 of the Companies Act 2006 (especially sections 1012–1017 and 1028, 1034) and authorities interpreting the effect of disclaimer and restoration.

Background and parties. The claimant, a specialist vehicle finance lender, held a legal charge dated 31 December 2017 (the 2017 Charge) over leasehold property charged by Buzzlines Coaches Limited (the Company). The Company was struck off and dissolved at the end of 2019. The Treasury Solicitor filed a notice of disclaimer of bona vacantia in or about March 2020 and served that notice on the claimant on 19 May 2020. The claimant issued these proceedings on 1 June 2020 seeking (i) a declaration that the claimant remains entitled to its legal mortgage following dissolution and disclaimer, (ii) an order restoring the Company to the register (administrative restoration had occurred shortly before the hearing) and, alternatively, (iii) a vesting order under section 1017 of the Companies Act 2006.

Procedural posture. The Registrar had administratively restored the Company to the register after proceedings commenced, but the Treasury Solicitor had filed a notice of disclaimer before restoration and after proceedings were started. The Treasury Solicitor did not appear at the hearing. The Company had not been formally joined but the judge ordered that notice of the judgment be served on the Company with a right to apply to vary or set aside.

Issues framed. The court identified and decided three principal issues: (1) whether the claimant's rights under the 2017 Charge survived any Crown disclaimer; (2) whether section 1016(1) of the Companies Act 2006 precluded the Crown's disclaimer from taking effect because of the timing and service of notice and the claimant's application; and (3) on the hypothesis that disclaimer took effect, whether restoration of the Company to the register automatically re-vested the property in the Company.

Court's reasoning and rulings. On the first issue the court held that the claimant's rights survived because section 1015(2) provides that a Crown disclaimer does not, except so far as necessary to release the company from liability, affect the rights of any other person; the judge treated that provision as operating in the same way as section 178(4) of the Insolvency Act 1986 and relied on Hindcastle and related authority to conclude third-party proprietary rights continue. On the second issue the court found that section 1016(1) prevented the disclaimer taking effect because service reached the claimant on 19 May 2020 and the claimant commenced proceedings within 14 days (on 1 June 2020) and sought a vesting order; the court saw no reason to make a contrary direction under section 1016(1)(b). On the third issue the court held that, if disclaimer had taken effect, restoration under sections 1028 and 1032 meant the company was deemed to have continued in existence and that, following established High Court decisions (Allied Dunbar, re Fivestar, Carrowreagh), revesting would occur on restoration; the court followed those English and Northern Ireland authorities rather than the contrasting Scottish decision in ELB Securities.

Subsidiary and contextual observations. The judgment summarised the statutory scheme in Part 31 of the Companies Act 2006, discussed historical common-law positions, and reviewed the domestic case-law trilogy that supports revesting on restoration. The court emphasised that section 1034 protects dispositions made by the Crown while recognising that a statutory disclaimer has been treated in English authorities as not amounting to a disposition that survives restoration.

This first-instance claim was successful. The court declared that the Crown's notice of disclaimer did not take effect because section 1016(1) required prior service and the 14-day period for an application for a vesting order had not expired when the claimant issued proceedings and sought a vesting order. The court also concluded that, in any event, restoration of the company to the register under sections 1028 and 1032 resulted in the property revesting in the company and that the claimant's legal mortgage (the 2017 Charge) remains vested in the claimant, consistent with section 1015(2) and relevant authorities (including Hindcastle and the High Court trilogy of Allied Dunbar, re Fivestar and Carrowreagh).