Scottish Court of Session Decisions

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 67

XA135/14

 

Lady Paton

Lady Smith

Sheriff Principal Stephen QC

 

OPINION OF THE COURT

delivered by LADY PATON

in the cause

 

ELB SECURITIES LIMITED

Pursuers and respondents;

against

(FIRST) ALAN LOVE;  (SECOND) PRESTWICK HOTELS LIMITED

Defenders and appellants:

Pursuers and respondents:  Jones, Solicitor Advocate;  bto

Defenders and appellants: G MacColl;  John Mair Solicitors t/a Campbell Mair

18 September 2015

Tenant company’s dissolution and restoration to the register:  effect on lease
[1]        Prestwick Hotels Limited (“PHL”) had a tenancy of the fifth floor of 166 Buchanan Street, Glasgow, in terms of a lease between PHL and the executors of Peter Fox.  On 24 January 2013, the landlords’ interest was purchased by the pursuers (hereinafter referred to as “the landlords”). 

[2]        On 14 June 2013, PHL was struck off the Companies Register and dissolved as a result of its failure to comply with statutory obligations, including a failure to lodge company accounts over a six‑year period.  On 13 August 2013 the landlords raised an action in Glasgow Sheriff Court against PHL and a director Alan Love (“the defenders”) seeking their removal from the fifth floor.  In September 2013 Mr Love petitioned Hamilton Sheriff Court to have PHL restored to the register.  It was averred that there had been administrative oversight;  accounts would be prepared and produced;  PHL was solvent, carrying on business, and wished to continue leasing the fifth floor despite the landlords’ action of declarator and removing.  The plea-in-law stated that, in the circumstances, it was just and proper that PHL should be restored to the register. 

[3]        On 3 October 2013 the sheriff at Hamilton restored PHL to the register, issuing an interlocutor in the following terms: 

“The sheriff … orders that the name of the company Prestwick Hotels Limited be restored to the Register of Companies in terms of section 1031(1) of the Companies Act 2006 on the grounds that it is just and proper in the circumstances narrated and restores the company to the same position as if it had not been struck off …”

 

Thereafter, in their defence to the action for declarator and removing in Glasgow Sheriff Court, the defenders submitted that PHL having been restored to the register, the lease between PHL and the landlords continued as if there had been no interruption.  By contrast the landlords’ contention was that, as a consequence of PHL’s dissolution and a notice of disclaimer issued by the Queen’s and Lord Treasurer’s Remembrancer (QLTR) dated 15 July 2013 (see paragraph [7] below), the lease with PHL had come to an end on 15 July 2013 in terms of the Companies Act 2006. 

[4]        After a debate in Glasgow Sheriff Court, Sheriff Crozier found in favour of the defenders.  By interlocutor dated 4 April 2014 he dismissed the action for declarator and removing as irrelevant.  The landlords appealed to the Sheriff Principal.  By interlocutor dated 21 August 2014 Sheriff Principal CAL Scott QC allowed the appeal, recalled the sheriff’s interlocutor, and granted decree de plano for declarator that PHL was dissolved on 14 June 2013 and that the lease was at an end;  and for removal of the defenders from the premises.  The Sheriff Principal also remitted the case to the sheriff to determine further procedure in relation to the fourth crave for violent profits.  The defenders appealed to the Court of Session. 

 

Statutory scheme

[5]        Chapters 2 and 3 of Part 31 of the Companies Act 2006 (“the 2006 Act”) provide inter alia as follows: 

“1012 Property of dissolved company to be bona vacantia

(1)   When a company is dissolved, all property and rights whatsoever vested in … the company immediately before its dissolution (including leashold property …) are deemed to be bona vacantia …

(2)   Subsection (1) has effect subject to the possible restoration of the company to the register under Chapter 3 (see section 1034).

 

1013 Crown disclaimer of property vesting as bona vacantia

(1)   Where property vests in the Crown under section 1012, the Crown’s title to it under that section may be disclaimed by a notice signed by the Crown’s representative … in relation to property in Scotland, the Queen’s and Lord Treasurer’s Remembrancer.

 

1014 Effect of Crown disclaimer

(1)   Where notice of disclaimer is executed under section 1013 as respects any property, that property is deemed not to have vested in the Crown under section 1012.

(2)   The following sections contain provisions as to the effect of the Crown disclaimer – … sections 1020 to 1022 apply in relation to property in Scotland …

 

1020 General effect of disclaimer

(1)   The Crown’s disclaimer operates to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company, and the property of the company, in or in respect of the property disclaimed.

(2)   It does not (except so far as is necessary for the purpose of releasing the company and its property from liability) affect the rights or liabilities of any other person.

 

1021 Power of court to make vesting order

(1)   The court may –

(a)   on application by a person who … claims an interest in disclaimed property or is under a liability not discharged by this Act in respect of the disclaimed property, and

(b)   on hearing such persons as it thinks fit,

       make an order for the vesting of the property in or its delivery to any persons entitled to it, or to whom it may seem just that the property should be delivered by way of compensation for such liability …

(2)   The order may be made on such terms as the court thinks fit. 

(3)   On a vesting order being made under this section, the property comprised in it vests accordingly in the person named in that behalf in the order, without conveyance or assignation for that purpose.

 

1022 Protection of persons holding under a lease

(1)   Where the property disclaimed is held under a lease the court must not make a vesting order in favour of a person claiming under the company, whether –

(a)   as sub-lessee, or

(b)  as creditor in a duly registered or (as the case may be) recorded heritable security over a lease

       except on the following terms.

(2)   The person must by the order be made subject –

(a)   to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property …

 

1029 Application to court for restoration to the register

(1)   An application may be made to the court to restore to the register a company [that has been dissolved or struck off] …

 

1030 When application to the court may be made

(1)   An application to the court for restoration of a company to the register may be made at any time for the purpose of bringing proceedings against the company for damages for personal injury …

(4)   In any other case an application to the court for restoration of a company to the register may not be made after the end of the period of six years from the date of the dissolution of the company …

 

1031 Decision on application for restoration by the court

(1)   On an application under section 1029 the court may order the restoration of the company to the register …

(c)   if … the court considers it just to do so …

 

 

1032 Effect of court order for restoration to the register

(1)   The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register …

  (3)   The court may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register …

 

1034 Effect of restoration to the register where property has vested as bona vacantia

(1)   The person in whom any property or right is vested by section 1012 (property of dissolved company to be bona vacantia) may dispose of, or of an interest in, that property or right despite the fact that the company may be restored to the register under this Chapter. 

(2)   If the company is restored to the register –

(a)   the restoration does not affect the disposition …

(b)   the Crown … shall pay to the company an amount equal to –

(i)    the amount of any consideration received for the property or right or, as the case may be, the interest in it, or

(ii)   the value of any such consideration at the time of the disposition,

or, if no consideration was received an amount equal to the value of the property, right or interest disposed or, as at the date of the disposition. 

(3)   There may be deducted from the amount payable under subsection (2)(b) the reasonable costs of the Crown representative … “

 

The QLTR’s disclaimer
[6]        Section 1012 of the 2006 Act provides that when a company is dissolved, “all property and rights whatsoever vested in” the company are deemed to be bona vacantia, subject to the possible restoration of the company to the register.  Section 1013 provides that where property vests in the Crown under section 1012, the Crown’s title to it may be disclaimed by a notice signed by the QLTR.  Sections 1014 and 1020 to 1022 set out the effect in Scotland of the QLTR’s disclaimer.  Sections 1029 to 1034 provide for restoration of a dissolved company to the register.  

[7]        In the present case, following upon PHL’s dissolution, the QLTR issued a notice of disclaimer dated 15 July 2013, disclaiming the Crown’s whole right and title in and to PHL’s interest in the lease (paragraph [4] of the Sheriff Principal’s opinion).  The parties’ dispute concerns the effect of that disclaimer, and the proper construction of the 2006 Act, in particular section 1032.  

 

Submissions for the defenders and appellants
[8]        Counsel for the defenders submitted that section 1032 was a retrospective deeming provision which had the following “as-you-were” effects:  (i) the company was deemed never to have been dissolved;  (ii) the company’s property was deemed never to have vested in the Crown as bona vacantia;  (iii) there was deemed never to have been a disclaimer by the QLTR;  (iv) sections 1014 and 1020 to 1022 of the 2006 Act simply did not come into play. 

[9]        The solution to any concern that such a construction would result in commercial uncertainty lay in the permissive wording of section 1031.  When a petition for restoration was presented, the sheriff was entitled to weigh up potential problems, and could refuse the petition.  However the present case involved only a brief time-period with no complications or complexities, and accordingly refusal of the restoration petition would have been inappropriate.  

[10]      Such a construction did not render section 1032(3) otiose.  Subsection (3) was simply an acknowledgment that in certain cases it might be appropriate for the court to give clarifying directions, to avoid any arguments.  

[11]      Section 1034 supported the defenders’ position, as that section was necessary to protect bona fide third parties who had acquired title from the Crown:  but sections 1020, 1021 and 1022 simply did not come into play.  The defenders’ construction was consistent with authorities such as Joddrell v Peaktone [2013] 1 WLR 784 (not cited to the Sheriff Principal);  Gore-Browne on Companies, 19^th up-date, paragraph [15] fn 1;  Allied Dunbar Assurance plc v Fowle and others [1994] BCC 636, particularly at page 424B et seq;  Beauchamp Pizza Limited v Coventry City Council [2010] EWHC 926, which concerned an administrative restoration to the register but nevertheless contained some useful parallels. 

[12]      The defenders’ construction was also supported by the specific terms of the interlocutor granted by Hamilton Sheriff Court. 

[13]      The Sheriff Principal’s interlocutor should be recalled, and the action for declarator and removing dismissed.

 

Submissions for the pursuers and respondents
[14]      On a proper construction, the 2006 Act provided two pathways:  (i) where bona vacantia continued to vest in the Crown;  and (ii) where bona vacantia were disclaimed, and property was deemed not to have vested in the Crown.  The defenders’ “as-you-were” construction undermined and cut across both pathways (namely section 1034, and sections 1014, 1020 to 1022).  For example, any title received under section 1021 could be cut down at any time by the granting of a restoration petition;  a mesothelioma pursuer could apply for restoration at any time (section 1030(1)) bringing to life contractual and other rights and liabilities which had not existed for decades.  Property would have to be returned to the restored company, even if that property had been sold on to another person, or even if a court decree of declarator and removing had been granted.  Parliament could not have intended those consequences. 

[15]      The defenders’ submission relating to section 1031 (namely that commercial uncertainty could be cured by the sheriff’s careful assessment of problems likely to arise from restoration and refusal of the petition if necessary) would result in restoration petitions becoming much more complex, difficult and expensive. 

[16]      In any event, the general provision in section 1032 had to give way to the special provisions in the Act.  And on the defenders’ construction, subsection (3) of section 1032 would be superfluous. 

[17]      As for the authorities, Joddrell did not consider the English equivalents of sections 1020 to 1022 (namely sections 1015 to 1019), nor sections 1033 and 1034, and thus did not provide as much assistance as the defenders suggested.  Hindcastle Ltd supported the proposition that the QLTR’s disclaimer terminated PHL’s rights in the lease.  In Beauchamp, the court was seeking to reconcile two independent statutes, whereas, in the present case, the issue was the proper construction of the statutory scheme contained in the 2006 Act. 

[18]      Finally, the wording in the sheriff’s interlocutor of 3 October 2013 simply reflected section 1032(1). 

[19]      The appeal should be refused, and the court should adhere to the interlocutor of the Sheriff Principal. 

 

Discussion
[20]      In our opinion, the Companies Act 2006 must be construed as a whole.  Section 1032(1) provides: 

“The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register [emphasis added].”

 

We accept, therefore, that a court order restoring a company to the register will in general have the effect that there is deemed to have been no gap or interruption in the company’s existence.  That uninterrupted status will be of importance in many circumstances not necessarily connected with the issues arising in the present case (see, for example, Joddrell v Peaktone [2013] 1 WLR 784, where a company was not permitted to escape from a personal injuries action against it). 

[21]      However where a general provision in an Act is qualified by special provisions in the same Act which define particular outcome(s) in particular circumstances, we consider that the general provision must give way to the special provisions (cf Bennion, Statutory Interpretation (6^th Edition) at page 1038:  generalibus specialia derogant).  Thus section 1032 must give way to any relevant special provisions in the 2006 Act. 

[22]      Relevant special provisions are to be found in relation to the company’s property (a matter quite distinct from the company’s existence).  While the company may be deemed to have continued in existence during the period of dissolution, the special provisions governing the company’s property are set out in sections 1012 to 1014, and 1020 to 1022.  In our opinion, these sections have the following effect. 

[23]      Property vesting in the QLTR and not disclaimed:  On the company’s dissolution when being struck off the register, its property vests in the QLTR as bona vacantia (section 1012).  If the QLTR does not disclaim the property, that property remains vested in the Crown, who may dispose of the property to third parties.  If the company is later restored to the register, a disposal to a third party (for example a disposition of heritable property) is not affected by the restoration, but the Crown must pay to the restored company an amount equal to the price received, or the value of the consideration given, or the value of the property (section 1034). 

[24]      Property vesting in the QLTR but disclaimed by the QLTR:  On the company’s dissolution when being struck off the register, its property vests in the QLTR as bona vacantia (section 1012).  If the QLTR disclaims the property (section 1013), that has two important effects.  First, in terms of section 1020(1): 

“The Crown’s disclaimer operates to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company, and the property of the company, in or in respect of the property disclaimed.”

 

Thus all the company’s rights in the property are specifically brought to an end.  Secondly, in terms of section 1014(1): 

“Where notice of disclaimer is executed under section 1013 as respects any property, that property is deemed not to have vested in the Crown under section 1012.” 

 

It would appear therefore that the property at that stage is neither the company’s nor the Crown’s.  Interested third parties – for example, a creditor, or a sub-tenant – would be entitled to apply to the court to have the property transferred to them (sections 1021 and 1022, with certain safeguards for landlords).  But whatever else, the company’s rights in the property are at an end (section 1020(1)).

[25]      If the statutory scheme is applied in the present case, it can be seen that PHL was dissolved and struck off the register on 14 June 2013.  On that date, its rights in the lease vested in the Crown as bona vacantia.  However the Crown (the QLTR) issued a disclaimer on 15 July 2013.  The effects of the disclaimer were first, that PHL’s rights in the lease terminated as from the date of the disclaimer (15 July 2013);  and secondly, that any rights in the lease were deemed not to have vested in the Crown as bona vacantia.  Accordingly PHL’s “rights, interests and liabilities” in the lease, and the “property of the company” in the lease came to an end on 15 July 2013 (section 1020(1)).  In terms of sections 1021 and 1022 a court could, on an application by an interested party, make an order vesting the lease in any person “entitled to it” or “to whom it may seem just that the [lease] should be delivered by way of compensation for [a liability]”.  In the course of the debate before us it was not suggested, in our view correctly, that PHL qualifies in terms of these sections.

[26]      Thus on a proper construction of the 2006 Act, “the general effect” of the restoration of the company as provided for by section 1032, namely “that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register”, merely provides for the general approach which is to be adopted in such circumstances;  but that general approach must give way to the specific and detailed provisions concerning the company’s property as set out in sections 1012 to 1014 and 1020 to 1022.  As a result, therefore, we consider that PHL’s rights in the lease came to an end on 15 July 2013. 

[27]      We find support for that conclusion in the following further considerations.

[28]      The construction contended for by the defenders would lead to uncertainty and confusion in the commercial world (cf the Sheriff Principal’s observations in paragraphs [14] and [25] to [28] of his opinion).  In general, applications for restoration of a company may be made at any time in the six years following dissolution, but in the case of a personal injuries claimant, there is no time-limit (section 1030(1)).  Thus on the defenders’ construction, any transactions, contracts, titles, leases, and loans relating to the relevant company property would be struck at years later by an application for restoration resulting in an “as-you-were” position whereby the property simply reverted to the restored company as if the company had never ceased to exist and as if the dealings with the property over the recent years had never occurred.  Examples of the potential disruption were given by the solicitor advocate for the pursuers (see paragraph [14] above) and by the Sheriff Principal in paragraphs [25] to [27] of his opinion.  Parliament cannot have intended to produce such results.  We were not persuaded by the submission made by counsel for the defenders (noted in paragraph [9] above) that any uncertainty or disruption could be avoided by using the discretion given to the court in terms of section 1031(1) when considering a petition for restoration, in particular by identifying potential problems, carrying out a balancing exercise, and if necessary refusing the petition for restoration.  Petitions for restoration are in general intimated only to the Registrar of Companies and the Lord Advocate (for the QLTR), with advertisements being placed in the Edinburgh Gazette and a local newspaper (as happened in this case:  sheriff’s opinion paragraph [26]).  Petitions for restoration are not usually intimated more widely to other parties who might have an interest.  To make the defenders’ submission relating to section 1031(1) workable, there would have to be a much wider and more thorough investigative procedure at the stage when the petition for restoration is presented, significantly increasing pre‑hearing investigations;  the list of persons to whom intimation should be made;  the number and type of hearings;  and the complexity and expense of the restoration procedure.  Again, we cannot accept that this was Parliament’s intention.

[29]      Another consideration which supports the pursuers’ construction is the fact that, on the defenders’ construction, section 2013(3) does, in our view, become superfluous and unnecessary. 

[30]      Counsel for the defenders relied upon the wording of the interlocutor granted by Hamilton Sheriff Court, and certain authorities.  The wording of the interlocutor must, in our view, be read against the background of the statutory scheme in the 2006 Act.  The interlocutor does no more than reflect the wording of section 1032(1), and that section has to be construed in the context of the 2006 Act as a whole. 

[31]      We now turn to the authorities cited.  Joddrell v Peaktone Ltd [2013] 1 WLR 784 did not involve questions concerning the company’s property, bona vacantia, or disclaimer by the Crown, but rather the fate of a claim for personal injuries made against the company during its period of dissolution.  In our opinion Joddrell provides a good example of a situation where the general provision in section 1032 (the company deemed to have continued in existence) was able to prevail, as there was no relevant qualification or derogation from that general principle contained in other sections in the Act.  Thus the court was able to hold that the personal injury claimant’s action, although raised against the company during its period of dissolution, was not a nullity, as the order restoring the dissolved company to the register had the effect of retrospectively validating the action. 

[32]      In Allied Dunbar Assurance plc v Fowle and others [1994] BCC 422 the issue was not a question of the company’s property, but rather the effect of dissolution and restoration on the obligations of two guarantors who had entered into a covenant guaranteeing the performance of certain obligations by the company.  Although some discussion in that case might, at first sight, appear to give some guidance in relation to the statutory scheme, we are not persuaded that the focus of the case was sufficiently similar to that in the present case as to dissuade us from the conclusion we have reached. 

[33]      In Beauchamp Pizza Limited v Coventry City Council [2010] EWHC 926 (Ch), the court sought to reconcile provisions in the Licensing Act 2003 with provisions in the Companies Act 2006, whereas in the present case the issue is the proper construction of a scheme of provisions (both general and special) contained in one statute (the Companies Act 2006).  In Beauchamp, it was held that a licence (not a lease) was retrospectively revived by an administrative restoration of the company, notwithstanding certain provisions in the Licensing Act 2003.  Ultimately we do not accept that Beauchamp is sufficiently similar to the present case to constitute authority for the proposition advanced by the defenders.  

[34]      As for Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70, [1996] BCC 636, that case was concerned inter alia with the specific question whether a disclaimer operated to determine an insolvent tenant’s liabilities under a lease, and whether the rights or liabilities of another person were affected – again rather different questions from those arising in the present case.  But in any event we consider that dicta in Hindcastle Ltd support the proposition that the QLTR’s disclaimer terminated PHL’s rights, interests, and liabilities in the lease (see Lord Nicholls at pages 87 to 88 (AC) and pages 653 to 647 (BCC)). 

[35]      In the result therefore we are not persuaded that the Sheriff Principal has erred. 

 

The wording of the declarator
[36]      It might be thought that any decree of declarator should reflect the precise words of section 1020(1), along the following lines: 

“(two) finds and declares that the first defender’s rights, interests and liabilities, in the lease … are ended as from 15 July 2013 and that the parties thereto are no longer bound thereby …”

 

In fact the Sheriff Principal’s interlocutor of 21 August 2014 is as follows: 

“(two) finds and declares that the lease … is at an end and that the parties thereto are no longer bound thereby …”

 

[37]      However in this particular case there is no suggestion that a third party is eligible to make an application to the court in terms of sections 1021 and 1022 in the hope of being granted the leasehold interest as being “entitled to it”, or someone “to whom it may seem just that the [lease] should be delivered by way of compensation for [a liability] (see paragraph [25] above).  Thus in this particular case, as PHL’s rights and interests in the lease are at an end, the lease itself is at an end.  Accordingly the wording of the Sheriff Principal’s interlocutor dated 21 August 2014 at page 46 of the appeal print (reflecting as it does the second crave of the initial writ) is, in our view, entirely appropriate in this case. 

Decision

[38]      For the reasons given above, we refuse the appeal, and adhere to the interlocutor of the Sheriff Principal dated 21 August 2014.  We continue the question of expenses.