David William Dixon & Anor. v The Crown Estate Commissioners

This is a first instance Part 8 claim for vesting orders under s.181 of the Law of Property Act 1925 and s.44(ii)(c) of the Trustee Act 1925 following the striking-off and dissolution of Dixon Prestige Homes Limited and subsequent disclaimer by the Treasury Solicitor under s.1013 of the Companies Act 2006 which caused the properties to escheat to the Crown Estate Commissioners. The court held that (i) escheat does not extinguish subordinate equitable interests so that such interests can bind the Crown or Commissioners, (ii) a vesting order under s.44 requires a trust to have existed at the time of dissolution, and (iii) where no express trust exists a vesting order may still be made under s.181 if a legal estate has determined. The judge found that the claimants had established proprietary estoppel: the company (through its accountant) had represented that the properties had been distributed to the shareholders; the claimants relied on that representation to their detriment (including payment of capital gains tax, permitting strike-off and failing to seek restoration) and it would be unconscionable for the Commissioners to deny title. Accordingly the court made vesting orders in favour of the claimants (pursuant to s.44 or, alternatively, s.181).

Background and nature of claim:

• The claimants sought vesting orders for two freehold properties formerly registered in the name of Dixon Prestige Homes Limited, which had been dissolved on 15 June 2010. The claim was issued by Part 8 claim form and relied on s.181 Law of Property Act 1925 and s.44(ii)(c) Trustee Act 1925.
• After dissolution the properties were deemed bona vacantia under s.1012 Companies Act 2006 and, on disclaimer by the Treasury Solicitor under s.1013, vested in the Crown Estate Commissioners by way of escheat.

Key facts:

• The claimants were the sole shareholders and former directors. They intended a solvent distribution in specie effected in about September 2008, and each received cash calculated on the basis that particular properties had been transferred to them. No transfer of title was in fact executed and no members' voluntary liquidation was undertaken; the company was later struck off and dissolved. The claimants relied upon the company’s accountant and acted to their detriment in various ways, including payment of tax and allowing the company to be struck off.

Issues framed by the court:

1. Whether subordinate equitable interests survive escheat to the Crown or Commissioners.
2. Whether the claimants had a legally enforceable right or equitable interest (proprietary estoppel) in the properties at the time of dissolution sufficient to support vesting orders under s.44 or s.181.
3. If proprietary estoppel is established, whether vesting orders should be made and on what statutory basis.

Court’s reasoning and conclusions:

• The judge reviewed authorities on escheat and subordinate interests and concluded subordinate interests (including equitable interests) survive escheat so the Commissioners take subject to such incumbrances.
• The court analysed the statutory tests for vesting orders: s.44 requires a trust existing at dissolution; s.181 applies where by reason of dissolution a legal estate has determined and a corresponding estate may be created and vested in the person who would have been entitled. Authorities were considered (Re Strathblaine, UBS, Quadracolour, Lizzium) to explain the different roles of s.44 and s.181.
• The judge found the elements of proprietary estoppel established: representations by the company (through its accountant), reliance by the claimants and detriment (payment of CGT, actions leading to strike-off, failure to seek restoration), and that it would be unconscionable for the Commissioners to deny title. The equitable interest was treated as sufficient to engage s.44 at the time of dissolution; alternatively s.181 jurisdiction was available.
• On remedy the court applied the modern proprietary estoppel principles (including Guest v Guest) and determined that vesting the legal and beneficial interests in the claimants would be consistent with justice and would correct the mistake; the Commissioners did not oppose the claim.

Result:

• The Part 8 claim was upheld and vesting orders were made pursuant to s.44(ii)(c) Trustee Act 1925, or alternatively s.181 Law of Property Act 1925, vesting Rodham Terrace in the first claimant and Little Corby Road in the second claimant. There was no order as to costs.

The Part 8 claim is allowed. The court found that the claimants had established proprietary estoppel giving rise to an equitable interest sufficient to engage the court’s jurisdiction under s.44(ii)(c) of the Trustee Act 1925 to make vesting orders; alternatively, the jurisdiction under s.181 of the Law of Property Act 1925 was engaged. Vesting orders were made to vest legal and beneficial title to Rodham Terrace in the first claimant and to Little Corby Road in the second claimant because it would be unconscionable for the Commissioners to deny the claimants’ ownership and this corrects the mistake occasioned by the failed transfers and dissolution.