Re Heidelstone Company Ltd and Courtview Management Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 24 November 2006
• Neutral Citation: [2006] IEHC 408
• Docket Number: [2006 No. 218 SP]
• Court: High Court
• Date: 24 November 2006

In re Heidelstone Co Ltd: Application of Boothman

IN THE MATTER OF HEIDELSTONE COMPANY LIMITED

AND

COURTVIEW MANAGEMENT LIMITED IN THE MATTER OF THE TRUSTEE ACT 1893 APPLICATION OF PAUL BOOTHMAN, PAULINE BOOTHMAN, MARY GOGGINS, PHILIP DONNELLY, ESTHER WALSH, ANNE WALSH, VALERIE BYRNE, JOHN CASHMAN, AILEEN FORBES BYRNE, HERBERT DARLINGTON AND RAYMOND FREELEY

AND

COURTVIEW MANAGEMENT (NO. 2) LIMITED

[2006] IEHC 408

[No. 218 SP/2006]

THE HIGH COURT

COMPANY LAW

Dissolution

Property - Failure to convey before dissolution - Company trustee for intended grantees - Vesting order - Whether applicants can obtain order vesting property in them as intended grantees - Whether company should be restored to register of companies - Relief granted (2006/218SP - Laffoy J - 24/11/2006) [2006] IEHC 408 In re Heidelstone Co Ltd: Application of Boothman

Facts: This application arose out of the manner in which the sale of apartments and townhouses are structured. Both the vendor company and the management company had been struck off the register of companies for failing to make returns and dissolved without the scheme of disposal having been fully implemented.

Held by Laffoy J. that the Court did have a power pursuant to s. 26 of the Trustee Act 1893 to vest the interest of the vendor company and/ or the management company in a new management company which had been incorporated by the applicants.

Reporter: R.W.

LANDLORD & TENANT (GROUND RENTS) (NO 2) ACT 1978

TRUSTEE ACT 1893 S26

TRUSTEE ACT 1893 S25

KAVANAGH, IN RE UNREP COSTELLO 23.11.1984 1985/2/433

NO 9 BOMORE ROAD, IN RE 1906 1 CH 359

QUEENSTOWN DRY DOCK SHIP BUILDING COMPANY, IN RE 1918 1 IR 356

GENERAL ACCIDENT ASSURANCE CORPORATION LTD, IN RE 1904 1 CH 147

RICHARD MILLS & CO (BRIERLY HILL), IN RE 1905 WN 36

STATE PROPERTY ACT 1954 S31

1 JUDGMENT of Miss Justice Laffoy delivered 24th November, 2006 .

2 The problem which the applicants seek to address on this application is, I suspect, a problem which will be encountered with increasing frequency in relation to the sale of apartments and townhouses in developments carried out during the last four decades.

3 Generally speaking, apartments have been sold by way of long lease, the internal shell only of the apartment being demised to the purchaser. As part of the scheme of disposal the vendor will have procured the incorporation of a management company with a memorandum and articles of association which provides for the apartment owners having control of the company once all of the apartments have been disposed of. The vendor will have entered into an agreement for the sale of the common areas, which generally include the external common areas such as car parking areas, the structure of the building and the internal common areas, at a nominal price but subject to the leases of the apartments. In this way, the apartment owners, through the medium of the management company, should eventually become the owners of the common areas.

4 In the case of townhouses with external common areas a similar type of scheme has been adopted with the variation that, since the enactment of the Landlord and Tenant (Ground Rents) Act, 1978, townhouses may only be sold by way of outright conveyance of the fee simple or assignment of the leasehold interest. So, in the case of a townhouse development, what the management company should ultimately acquire is the fee simple or the leasehold interest in the external common area subject to the easements and rights in favour of the purchasers of townhouses created by the conveyances or assignments to them.

5 In such developments the full implementation of the scheme of disposal by the apartment or house owners assuming control of the management company and by the common areas being conveyed to the management company is an essential element in completing the title of each apartment owner and house owner. If this becomes impossible because of the dissolution of the vendor company or the management company, or both, the title of each apartment owner and house owner remains incomplete. That is the position in which the first eleven applicants in this case find themselves.

6 In broad terms, what has happened in this case is that both the vendor company and the management company have been struck off the register of companies for failing to make returns and dissolved without the scheme of disposal having been fully implemented. The relief sought by the applicants in this case to remedy that difficulty is an order pursuant to s. 26 of the Trustee Act, 1893 (the Act of 1893) vesting the interest of the vendor company and/or the management company in a new management company which has been incorporated by the applicants. In general, for the reasons which I will now outline, I consider that the approach adopted by the applicants is correct and that they should be granted the relief sought. I will deal with the peculiarities of the applicants" own circumstances later.

7 I have no doubt that where, as part of a scheme of disposal of apartments or townhouses, a vendor incorporates a management company to manage the common areas and enters into an agreement to transfer the common areas to the management company on the completion of the sales of the apartments and houses, the management company becomes the owner in equity on the completion of the sales of all of the apartments or houses, as the case may be, subject to the terms of the agreement and subject to payment of any nominal sum provided for therein. On the completion of such sales, the vendor thereafter merely holds the legal estate as trustee on behalf of the management company.

8 Section 25 of the Act of 1893 provides that the High Court may, whenever it is expedient to appoint a new trustee or trustees, and it is found inexpedient, difficult or impracticable to do so without the assistance of the court, make an order appointing a new trustee even if there is no existing trustee, and s. 26 empowers the court to make a consequential vesting order in favour of the new trustee or trustees. Section 26 also provides that in the other circumstances set out in that section, one of which is where a trustee entitled to or possessed of any land cannot be found, the Court may make an order, which is called a vesting order in the Act, vesting the land in any such person, in any such manner and for any such estate as the court may direct.

9 In his unreported judgment, delivered on 23rd November, 1984, in a matter entitled In the Matter of the Trustee Act, 1893, John Kavanagh and Barbara Cantwell, applicants, Costello J., as he then was, considered the appropriateness of making a vesting order under s. 26 vesting the property in issue in the persons shown to be beneficially entitled to the property where the property was vested in a company as trustee at the date of its dissolution. The problem in that case arose because the vendors to the applicants had mortgaged the relevant property in fee simple to a company called Moore Paragon Ireland Limited as security for a loan. In March, 1983, that company had gone into voluntary liquidation. The liquidator agreed to transfer the mortgaged property and the mortgage debt to another company called Moore Business Forms Limited for a consideration which, presumably, was equivalent to the mortgage debt. That sum was duly paid. However, while the mortgage debt was transferred to Moore Business Forms Limited, the mortgaged property was not. In connection with the sale to the applicants in 1984 the mortgage debt was discharged and Moore Business Forms Limited purported to reconvey the mortgaged property, which it did not possess. The purpose of the application was to procure the vesting of the outstanding legal estate in the applicants.

10 On those facts, Costello J. declared that Moore Paragon Ireland Limited was at and immediately before the date of its dissolution possessed of an estate in fee simple in the property as trustee for Moore Business Forms Limited upon a trust within the meaning of the Act of 1893, and that in the events which had happened the applicants were then entitled to the beneficial interest under the trust. In order to get in the outstanding legal estate, Costello J. did not consider that it was necessary to resort to the expedient of appointing a new trustee under s. 25 of the Act of 1893, with a consequential vesting order under s. 26, as was done In re No. 9 Bomore Road [1906] 1 Ch. 359, which, incidentally, was followed in this jurisdiction in In re Queenstown Dry Dock Ship Building Company [1918] 1 I.R. 356. Instead he followed the English authorities in which it was held that a dissolved company is a trustee "who cannot be found" within the meaning of s. 26 ( In re General Accident Assurance Corporation Limited [1904] 1 Ch. 147; and In re Richard Mills & Co. (Brierly...