Leon v Her Majesty's Attorney General, Court of Appeal - Chancery Division, November 12, 2018, [2018] EWHC 3026 (Ch)

Resolution Date:November 12, 2018
Issuing Organization:Chancery Division
Actores:Leon v Her Majesty's Attorney General
 
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Neutral Citation Number: [2018] EWHC 3026 (Ch)

Case No: CH-2017-001318

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

CHANCERY APPEALS LIST (CHANCERY DIVISION)

Rolls Building

Fetter Lane, London, EC4A 1NL

Date: 12 November 2018

Before :

MR JUSTICE ARNOLD

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Between :

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Gerard van Tonder (instructed by Bi-Borough Shared Legal Services) for Westminster

Niraj Modha (instructed by Anthony Gold Solicitors) for Mr Leon

Clifford Payton (instructed by TLT LLP) for Kensington

Hearing date: 6 November 2018

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MR JUSTICE ARNOLD :

Introduction

  1. This is an appeal by the Second Defendant (``Westminster'') against an order of Chief Master Marsh dated 16 January 2018 vesting a lease dated 23 December 1993 (``the Lease'') of a flat on the ground floor of 122A Westbourne Terrace, London W2 6QJ (``the Property'') in the Claimant (``Mr Leon'') pursuant to section 1017 of the Companies Act 2006 (``the 2006 Act'') for the reasons given in the Chief Master's judgment dated 11 December 2017 ([2017] EWHC 3148 (Ch)). By a subsequent order dated 16 May 2018 the Chief Master determined that the vesting order should be on terms that Mr Leon was subject to the same liabilities and obligations as the lessee and was precluded from resisting any demands for payment of outstanding service charges by Westminster. Permission to appeal was granted by Rose J.

    The facts

  2. The Lease was granted by Westminster to Baronfield Ltd (``Baronfield'') on 23 December 1993 for a term of 125 years from 10 October 1988. The Lease was assigned by Baronfield to Kingley Properties Ltd (``Kingley'') in 1997 and by Kingley to Frinton Ltd (``Frinton'') in 2007. All three companies were associated with Mr Leon or his wife Brenda Leon. In the case of Frinton, Mr Leon owned 99% of the shares and the remaining 1% were held on trust for him by one David Hare. Mr Leon was also a director of Frinton until 9 November 2005; after that date Mrs Leon was a director of the company.

  3. On 21 October 2002 iGroup Mortgages Ltd (``iGroup'') entered into a mortgage with Frinton as mortgagor and Mr Leon as co-mortgagor (``the Mortgage'') securing an advance of £472,500 repayable at the end of 25 years on 56 Flanders Road, London W4 1NG (``Flanders Road''). Flanders Road was at that stage Mr and Mrs Leon's home.

  4. The Mortgage provided:

    ``A The mortgagor charges the property by way of legal mortgage with payment of all the money mentioned in condition 2.1 of the Mortgage Conditions. The mortgagor gives this charge with full title guarantee.

    B The co-mortgagor charges any right or interest in the property or its proceeds of sale which he/she may have which is not charged by clause A above as further security for the payment of the money mentioned in condition 2.2 of the Mortgage Conditions.

    ...

    11 The Co-Mortgagor

    Condition 4 to 10 apply to the co-mortgagor (if any) in the same way that they apply to the mortgagor.

    This means that:

    ? any obligations which apply to the mortgagor under those conditions also apply to the co-mortgagor;

    ? the lender can enforce its rights and remedies under those conditions against the co-mortgagor as well as the mortgagor;

    ? the lender (and any receiver appointed by the lender) will be the attorney of the co-mortgagor as well as the mortgagor to do the things mentioned in condition 7.12;

    ? the lender may give notice to the co-mortgagor in the same way as it may give notice to the mortgagor under condition 9 (except that the notice must be sent to the co-mortgagor's address as set out in this deed or to any other address which the co-mortgagor later gives to the lender in writing) and the co-mortgagor gives the same guarantee as the mortgagor gives under condition 10.''

  5. iGroup subsequently changed its name to GE Money Mortgages Ltd (``GE''). On 27 March 2007 Frinton, Mr Leon and GE entered into a deed of substituted security whereby the Lease was substituted as security under the Mortgage in place of Flanders Road. At around the same time Mr Leon sold Flanders Road.

  6. Frinton was dissolved on 17 February 2009 as a result of its failure to comply with its statutory filing requirements. No application for the restoration of Frinton to the register was made within the period of six years allowed for such an application pursuant to section 1024 of the 2006 Act.

  7. The consequence of Frinton's dissolution was that ``all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution (including leasehold property, but not including property held by the company on trust for another person)'' were deemed to be bona vacantia, and hence to belong to the Crown, pursuant to section 1012 of the 2006 Act.

  8. From at least 2009 onwards Mr Leon paid the mortgage payments and received the rental income from the Property.

  9. On 23 May 2016 GE transferred the Mortgage to Kensington by form TR4.

  10. Westminster discovered on 30 June 2016 that Frinton had been dissolved and that no application had been made for its restoration. It notified the Treasury Solicitor, representing the Crown, of the dissolution on 5 July 2016. On 30 August 2016 the Treasury Solicitor served a notice of disclaimer in respect of the Lease on behalf of the Crown pursuant to section 1013 of the 2006 Act.

  11. The current value of the...

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