Lost and found: Bona Vacantia property restored
Fivestar, a property development company, entered into a loan arrangement with a bank. As security for the loan, Fivestar granted security over its freehold interest in commercial property in Croydon, let to a tenant. Following default by Fivestar, the bank called in receivers and subsequently put the company into administration. The administrators inexplicably gave notice to dissolve Fivestar on the basis that "there are no further assets that remain to be realised".
Following dissolution, the receivers continued to deal with the tenant's negotiations for a new lease as the current lease was due to expire. Pursuant to the Landlord and Tenant Act 1954, the tenant issued a claim for a new lease. As Fivestar was dissolved by this date, so any remaining assets vested in the Crown bona vacantia, the tenant served notice of its claim on the Treasury Solicitor. In response, the Treasury Solicitor disclaimed the Crown's interest in the freehold.
Realising that the property was probably of some value, the bank applied for Fivestar to be restored to the register and placed in liquidation, together with an order that the disclaimed property be re-vested in the Fivestar.
All land in England and Wales ultimately belongs to the Crown. The Court confirmed that when freehold property was disclaimed by the Crown, it still owned the land but without the freehold interest and all the rights and obligations that went with it. The Court held that the effect of Fivestar's restoration was that the freehold interest was retrospectively re-created and re-vested in Fivestar in all respects as if it had never been dissolved and the freehold had never been disclaimed. The Court referred to the 1994 case of Allied Dunbar Assurance plc v Fowle as authority for this position. In Allied Dunbar, a lease disclaimed by the Crown was revived when the tenant was restored to the register.
In Fivestar's case, the Court considered that it would be "highly undesirable" for freehold and leasehold interests to be treated differently. The Court recognised that a landlord is left in "limbo" if a lease is disclaimed because it may be revived if the company is, at some stage, restored to the register. However, it was less concerned about the risk to the Crown of dealing with land that might be subject to an unexpected restoration, as the Crown had the more straightforward option of disposing of the bona vacantia property for value rather than disclaiming it.
Case: Re Fivestar Properties Ltd  EWHC 2782 (Ch)