High Court vests Medieval Castle in majority beneficial owner not offshore corporate trustee

The recent High Court judgment of Hamilton v Her Majesty’s Attorney-General and others [2022] EWHC 2132 (Ch) (12 August 2022) provides a salutary warning to offshore companies holding English freehold property on trust for others that the property will not automatically vest in the company, if the company is dissolved and subsequently restored to the register. The offshore company will need to apply for a vesting order and there is no guarantee that the court will revest the property in the company.

The Claims

This case involved competing claims for a vesting order under section 44(ii)(c) of the Trustee Act 1925 (TA) in respect of Walton Castle located in Somerset, England. One of the claimants was Walton Properties Limited (WPL), a Guernsey-registered company which held the freehold title of the Castle on trust for others. WPL was dissolved in May 2020 and was restored to the Guernsey Registry of Companies in May 2021. The other claimant was Margarita Hamilton (Ms Hamilton), who lived in the Castle, ran a wedding and events business there and held a majority beneficial interest in the Castle.

WPL claimed that legal estate in the Castle was extinguished on WPL’s dissolution, the Castle was without a freeholder and passed to the Crown by escheat (an old feudal term meaning that property reverts to the Crown where it is without an owner), and the Castle automatically revested in the company on its restoration under English property law or Guernsey company law. In the alternative, WPL sought an order under section 181 of the Law of Property Act 1925 (LPA) creating new legal title in the Castle and vesting it in the company.

Ms Hamilton claimed that legal estate in the Castle did not automatically revest in WPL upon its restoration and that the court should make a vesting order in her favour under section 44(ii)(c) of the TA.

The High Court’s decision

Despite WPL’s restoration to the register, the High Court decided to vest the Castle in Ms Hamilton. The court made that decision after determining the following key issues.

1. English freehold property held by an offshore company on a trust of land for others is governed by English common law, and not the law of the jurisdiction where the corporate trustee is incorporated.
2. At common law, where a UK-incorporated company or an offshore company holds English freehold property on trust for others and is dissolved, the legal estate in the freehold property is not extinguished upon the company’s dissolution, does not escheat to the Crown Estate and vests in the Crown subject to the trust unless and until the court decides to grant a vesting order under s44(ii)(c) of the TA. Accordingly, the Castle had vested in the Crown, subject to the trust, and there could be no question of creating a new legal estate under s. 181 of the LPA.
3. Ms Hamilton had standing to seek a vesting order because she held a majority beneficial interest in the Castle.
4. The court has a very wide discretion under s. 44(ii)(c) of the TA to vest land ‘in any such person in any such manner and for any such estate or interest as the court may direct’. The court’s statutory power is unfettered but must be exercised in order ‘to do justice in all the circumstances’ (Potier v Treasury Solicitor (Bona Vacantia) [2021] EWHC 1524 (Ch), para 48)

The High Court decided that vesting the Castle in Ms Hamilton was a just outcome because Ms Hamilton lived in the Castle, she was running a wedding and events business there and her business was unlikely to continue if the Castle was vested in WPL. This is because WPL’s ultimate beneficial owner had become bankrupt and the Castle would be at risk of being sold by his trustees in bankruptcy in order to pay creditors.

Consequences of the High Court decision

If English freehold property is held on trust for others by an offshore company and the company is dissolved, the property does not automatically revest in the company on its restoration. An application for a vesting order is required and there is no guarantee that the court will revest the property in the company. The court will adopt a pragmatic approach and look to do justice in all the circumstances.

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