Robert Lulham & Anor v The Crown State Commissioners [2025] EWHC 1572 (Ch)

[2025] EWHC 1572 (Ch)Case No PT-2024-000175
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 24 June 2025
Before
DEPUTY MASTER HOLDEN
Between
(1) ROBERT LULHAMClaimant(2) NICHOLA LULHAMClaimantTHE CROWN ESTATE COMMISSIONERSDefendant
Olivia Wilson (instructed by Streathers Highgate LLP) for Claimants for The Defendant did not appear and was not representedHearing Hearing date: 9 June 2025
Approved JudgmentThis judgment was handed down remotely at 10.30am on 24 June 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................

Deputy Master Holden:

[1]All land in England belongs ultimately to the Crown. The highest form of private ownership of land in English law is a freehold estate (or, more formally, an estate in fee simple absolute in possession of freehold tenure). Following the statutory reforms of 1925, it is one of the two legal estates in land which is capable of being created, the other being a leasehold estate. For most purposes, a freehold estate in English land is indistinguishable from absolute ownership, conferring unrestricted rights of enjoyment and alienation on the owner, without limit of time. However, a freehold estate is not the same as absolute ownership, as the unfortunate circumstances of this case reveal.

Factual background

[2]The Claimants, Robert and Nichola Lulham, are husband and wife. They, and a company incorporated in England and Wales called Matchmount Limited (the ‘Company’), of which they were the shareholders and directors, entered into a series of transactions to acquire interests in a property at 40 Kingsley Road, Maidstone, Kent (the ‘Property’), as follows (this information being taken from Land Registry documents):a. On 7 January 2005, the Company purchased the freehold interest in the Property for the sum of £60,000. The Company was registered as the proprietor of the freehold estate on 6 May 2005.b. The Property is divided into flats. Flat 2 in the Property, which may have been the first to have been acquired by the Claimants, is let by a lease dated 7 January 2005 for a term of 63 years from 29 September 2004 and made between the Company and Mrs Lulham. That lease currently has an unexpired term of just over 42 years. The price stated to have been paid for that lease is £60,000.c. Flat 1 in the Property is let by a lease dated 17 December 1993 for a term of 99 years from 1 January 1993, with an unexpired term of around 66 ½ years. That lease was purchased by the Claimants jointly on 19 June 2014 for the sum of £120,500. It is not clear to me whether the least of Flat 1 had previously been acquired by Mrs Lulham as part of the original 2005 transaction, but in any event after 2014 it was held jointly for the Claimants.[3]So the Claimants obtained the freehold interest in the Property via the Company, which they owned and controlled, and between them they acquired long leases of Flat 1 (in their joint names) and of Flat 2 (in Mrs Lulham’s name) in the Property. Following those transactions, they would have been forgiven for thinking that the Property was, to all intents and purposes, theirs.[4]Unfortunately, the Company which held the freehold interest in the Property was then not properly dealt with. Annual returns for the Company were not filed. This led to the Registrar publishing, on 20 October 2009, a First Gazette notice for the compulsory striking-off of the Company. Annual returns were still not filed. On 2 February 2010 a Final Gazette notice for the dissolution of the Company was then published.[5]The Claimants were unaware of the dissolution of the Company. The registered office address for the Company was that of the Claimants’ then-solicitors, Walker and Walker Solicitors of High Street, Sevenoaks. The evidence filed in support of the claim given by the Claimants’ current solicitor, Mr Gabriel Grant, says at paragraph 14 that:
“The Claimants were the Directors in charge of preparing and submitting the Company’s annual returns. Unfortunately I am informed that their former solicitors, Walker and Walker, were the registered address for Companies House purposes and the Claimants were not sent any reminders to submit the Company’s annual returns to Companies House. The Claimants inform me that they were unaware that the failure to submit annual returns to Companies House would result in the dissolution of the Company.”
[6]After the Company was dissolved, the Claimants could have applied within 6 years of the date of the dissolution for the restoration of the Company to the Register, either under section 1024(1) or section 1029 of the Companies Act 2006 (the ‘Companies Act’). However, Mr Grant says in his witness statement at paragraph 15 that, following its dissolution, “the Company’s fate was not then discussed until many years later.” It is not entirely clear from the evidence when the Claimants first discovered the problem, but I take it that it was after the 6-year period in which the Company could have been restored to the Register.[7]The dissolution of the Company had therefore become irrevocable. The Company had ceased to exist, and it could not be brought back. The consequence of this for the Company’s freehold interest in the Property is set out at section 1012(1) of the Companies Act:
“When a company is dissolved, 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) are deemed to be bona vacantia and- (a) accordingly belong to the Crown, or to the Duchy of Lancaster or to the Duke of Cornwall for the time being (as the case may be), and (b) vest and may be dealt with in the same manner as other bona vacantia accruing to the Crown, to the Duchy of Lancaster or to the Duke of Cornwall.”
[8]The freehold interest in the Property therefore belonged to the Crown as bona vacantia.[9]Under section 1013 of the Companies Act, the Crown’s title to property vested in it under section 1012 can be disclaimed by a notice signed by the Crown’s representative, that is to say by the Treasury Solicitor. That is what happened in this case. On 10 March 2022, the Treasury Solicitor issued a notice of disclaimer of the Crown’s interest in the Property.[10]Pursuant to section 1015(1) of the Companies Act, the Crown’s disclaimer “operates so as to terminate, as from the date of the disclaimer, the rights, interests and liabilities of the company in or in respect of the property disclaimed.” However, pursuant to section 1015(2) of the Act, the disclaimer “does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person.” The result of the latter subsection is that the Claimants continue to hold the leases of Flats 1 and 2 in the Property.[11]The legal effect of the disclaimer on the Company’s freehold interest in the Property is curious. The effect is that the freehold interest is terminated, and the Property then reverts to its ultimate owner pursuant to a legal doctrine called escheat. The ultimate owner of the Property, though, is also the Crown, which as I have already said is the ultimate owner of all land in England. Mr Stanley Burnton QC (as he then was, sitting as a Deputy Judge of the Chancery Division) in Scmlla Properties Limited v Gesso Properties (BVI) [1995] BCC 793, at p.805G said that this “boomerang effect” appeared to be an unintended consequence of the way that the legislation is drafted. I agree, but in any event the result is clear enough: the Crown’s disclaimer of the freehold interest in the Property caused the freehold to determine and the Property to vest in the Crown directly by escheat.[12]One practical consequence of this is that the matter ceased to be within the remit of the Treasury Solicitor, and instead came to be dealt with by the Crown Estate Commissioners. In matters such as this, the Crown Estate Commissioners are represented by the law firm of Burges Salmon, who wrote to the Claimants’ solicitors on 27 March 2023 setting out the Commissioners’ position. This appears to be the Commissioners’ standard position in situations like this. It was said by Burges Salmon that the Crown Estate “does not propose to take any action which might be construed as an act of management, possession or ownership in relation to the Property, since to do so may incur upon it liabilities with which the Property is, or may become, encumbered.” That was said to be on the basis that “[t]he Crown Estate does not accept that it should be, in effect, the guarantor of last resort for companies and individuals who have failed financially, leaving onerous property in their wake. To do so would not be an appropriate application of The Crown Estate's revenues, nor is it a function envisaged for The Crown Estate by Parliament.” Burges Salmon therefore indicated that the Crown Estate would not accept service of an application by the Claimants for a vesting order in the Property, and would not “seek to interfere with any application made.”[13]In these difficult circumstances, the Claimants have applied to the Court, via a Part 8 claim form issued on 29 November 2024, for a vesting order in respect of the Property.[14]There was a disposal hearing before me on 9 June 2025. The Claimants were represented by counsel, Ms Olivia Wilson. I am grateful to Ms Wilson for her well-judged and well-articulated submissions.

The Claimants’ application

[15]The Claimants apply for a vesting order in respect of the Property under section 1017 of the Companies Act, alternatively under section 181 of the Law of Property Act 1925 (the ‘Law of Property Act’). I note that the Claimants do not assert that the Company held its interest in the Property on trust for them, such that the Court’s separate jurisdiction to make a vesting order in respect of trust property under s.44 of the Trustee Act 1925 is not engaged in this case.

(a) Application under the Companies Act

[16]Section 1017 of the Companies Act provides that:
“(1) The court may on application by a person who— (a) claims an interest in the disclaimed property, or (b) is under a liability in respect of the disclaimed property that is not discharged by the disclaimer, make an order under this section in respect of the property. (2) An order under this section is an order for the vesting of the disclaimed property in, or its delivery to— (a) a person entitled to it (or a trustee for such a person), or (b) a person subject to such a liability as is mentioned in subsection (1)(b) (or a trustee for such a person). (3) An order under subsection (2)(b) may only be made where it appears to the court that it would be just to do so for the purpose of compensating the person subject to the liability in respect of the disclaimer. (4) An order under this section may be made on such terms as the court thinks fit. (5) On a vesting order being made under this section, the property comprised in it vests in the person named in that behalf in the order without conveyance, assignment or transfer.”
[17]The Claimants’ application for a vesting order was made under what may be called both ‘limbs’ of section 1017:a. Limb 1: pursuant to section 1017(1)(a) and (2)(a), the Claimants submit that they have “an interest in the disclaimed property” and seek “an order for the vesting of the disclaimed property” in them as the persons “entitled to it.”b. Limb 2: pursuant to section 1017(1)(b) and 2(b), the Claimants submit that they are “under a liability in respect of the disclaimer property that is not discharged by the disclaimer” and seek “an order for the vesting of the disclaimed property” in them as persons “subject to such a liability.”[18]In respect of limb 1, the Claimants submit that a vesting order can and should be made in their favour because they have an interest in the disclaimed freehold, on the basis that they were, collectively, the directors and shareholders of the Company, and because they paid a premium to acquire the freehold interest in the Property “via the Company.”[19]Further, the Claimants submit that they have an interest in the disclaimed freehold because they hold the leases of Flats 1 and 2 in the Property, pursuant to which they have the benefit of landlord’s covenants on the part of the Company, such as to maintain the Property and to keep it insured. The Claimants submit that this gives them “a direct (albeit non-proprietary) interest in the freehold title because they have a contractual entitlement to insist on the maintenance and management of the Property.” They submit that this is a sufficient interest, and rely on the judgment of David Richards LJ (as he then was) in Leon v Attorney General [2019] EWCA Civ 2047; [2020] Bus LR 598, at paragraph [23], that:
“The judge was, in my view, right to say that the question was "does the interest claimed by the applicant entitle him to the property". Entitlement to the property does not here mean an absolute entitlement. If it did, it would not be necessary to have subsection (2)(a). Rather, it means that the court will make a vesting order in favour of the person whose interest in the disclaimed property is such as, in the judgment of the court, to entitle the applicant to the property in the circumstances of the case. There may well be competing interests and the court will have to choose between them.”
[20]In respect of limb 2, the Claimants submit that a vesting order of the freehold in the Property can also be made in their favour because they owe liabilities under the terms of their leases of Flats 1 and 2 in the Property. They say that they are under a direct and subsisting obligation to perform their covenants as tenants under those leases, which are liabilities that have not been discharged by the Crown’s disclaimer.[21]In respect of this limb, section 1017(3) of the Companies Act also provides that “[a]n order under subsection (2)(b) may only be made where it appears to the court that it would be just to do so for the purpose of compensating the person subject to the liability in respect of the disclaimer.” The Claimants acknowledge that this subsection is intended to avoid an applicant for a vesting order obtaining a windfall benefit, but they refer to the judgment of Chief Master Marsh, referred by the Court of Appeal in Leon v Attorney General, at [39] – [40], that:
“Compensation in section 1017(3) seems to be used in the sense that a vesting order will counter-balance the liability. It is not necessary that the benefit of the vesting order directly matches the liability, but it seems to me there must be a reasonable relationship between the liability and the benefit to be obtained from the making of a vesting order. If there is a substantial mis-match, the court might consider it is not just to make the order.”
[22]The Claimants submit that, as the freehold interest in the Property is subject to the long leases of Flats 1 and 2, it must only be of “low or nominal value”, and that this low or nominal value is commensurate with the difficulties faced by the Claimants as a result of a lack of any landlord to perform the management and maintenance services to which the Claimants are contractually entitled, such that an order vesting the freehold interest in the Property in them would be just to compensate them in respect of the disclaimer.

(b) Application under the Law of Property Act

[23]The Claimants also apply for a vesting order pursuant to section 181(1) of the Law of Property Act, which provides that:
“Where, by reason of the dissolution of a corporation either before or after the commencement of this Act, a legal estate in any property has determined, the court may by order create a corresponding estate and vest the same in the person who would have been entitled to the estate which determined had it remained a subsisting estate.”
[24]The Claimants refer to the decision of Master Clark in Lizzium Limited v The Crown Estate Commissioners [2021] EWHC 941 (Ch), at paragraph [55], where the Master said that the expression “would have been entitled to the estate that determined” under section 181(1) “is to be construed as meaning entitled as a matter of a legal right subsisting at the date of the escheat, even if some further steps need to be taken to achieve an enforceable entitlement to the property.” The Claimants submit that they fulfil this requirement because they were the shareholders and directors of the Company, such that – had the Company’s freehold interest in the Property continued to exist, they “had a legal right to compel a transfer of the freehold title from the Company to themselves as joint freehold owners.”

Discussion and disposal

(a) s.1017 of the Companies Act – limb 1

[25]I consider first the Court’s jurisdiction to make a vesting order under limb 1 of section 1017 of the Companies Act, namely the jurisdiction at section 1017(1)(a) and (2)(a) of the Act. These provisions require the applicant to demonstrate that they have (or claim) “an interest in the disclaimed property”, which in turn would enable the Court to vest that interest in the person “entitled to it.”[26]The Claimants’ case is that they have an interest in the disclaimed freehold of the Property because they were, collectively, the shareholders in the Company, and paid a premium to acquire the freehold “via the Company.” In my view, that is not correct. The fact that the Claimants were the shareholders in the Company, and (presumably) used their own funds to capitalise the Company so that it could purchase the freehold, does not mean that the Claimants have an interest in the Company’s property. An argument to that effect was (correctly) disavowed by the applicant in Leon v Attorney General: see paragraph [27] of the judgment:
“I should record that Mr Butler expressly disavowed any reliance on Mr Leon’s ownership of the entire share capital of Frinton [the dissolved company] as giving him an interest in the Lease. He was plainly right to do so. The Chief Master found as a fact that Frinton did not hold the Lease on trust for Mr Leon but was beneficially owned by Frinton, a finding that was not the subject of an appeal. To attribute an interest in the Lease to Mr Leon in those circumstances would necessarily involve a piercing of the corporate veil which could not be justified, having regard to the decision of the Supreme Court in Prest v Prest [2013] 2 AC 415.”
[27]The Claimants also relied on the landlord’s covenants under their leases as giving them “a direct (albeit non-proprietary) interest in the freehold title because they have a contractual entitlement to insist on the maintenance and management of the Property.” They submitted that this gave them a sufficient interest in the disclaimed freehold to enable the Court to make a vesting order in their favour.[28]I accept that, in Leon v Attorney General, the Court of Appeal queried whether an applicant under limb 1 must show the existence of a proprietary interest in the disclaimed property, in the strict sense of that term. Nevertheless, the Court did clearly indicate that “the applicant must establish that he has such an interest in the disclaimed property as to be, in the court’s view, “entitled to” the disclaimed property”: see paragraph [24] of the judgment. Moreover, the Court of Appeal explicitly rejected the more expansive construction of section 1017(1)(a) and (2)(a) adopted by Mr Gavin Lightman QC (as he then was) in In Re Vedmay Ltd (1993) 26 HLR 70, who had held that “any financial interest in the subsistence or otherwise of the lease and includes, in particular, any interest that would be adversely affected by the disclaimer” would be sufficient. David Richards LJ said at paragraph [32] of the decision that “[i]n my judgment, this is far too wide a reading of “an interest in the disclaimed property” for which there is no basis in the authorities or in the statutory context.”[29]Applying that authority, I do not agree that the fact that the Claimants had the benefit of landlord covenants under their leases to maintain the Property gives them a sufficient interest in the freehold so as to enable me to make a vesting order in their favour. Clearly, the fact that a tenant has the benefit of covenants from the freeholder does not mean that the tenant is, in any sense, “entitled to” that freehold interest.[30]I therefore cannot make a vesting order under limb 1 of section 1017 of the Companies Act. (b). s.1017 of the Companies Act – limb 2[31]I turn to limb 2 of section 1017, namely the jurisdiction at section 1017(1)(b), (2)(b), and (3) of the Act. These provisions require the applicant to demonstrate that they are “under aliability in respect of the disclaimed property that is not discharged by the disclaimer”, and that it would be just for the Court to make a vesting order “for the purpose of compensating the person subject to the liability in respect of the disclaimer.”[32]Again, the only authority I have been referred to on the construction of these provisions is Leon v Attorney General. In that case, it was common ground that Mr Leon owed a liability in respect of the disclaimed property, because the disclaimed property was a lease subject to a mortgage, and Mr Leon was a co-mortgagor on that mortgage. The Court of Appeal also held that Mr Leon was “clearly under a liability in respect of” the lease, because he was under a contractual obligation to “keep the terms” of that lease; see paragraph [34] of the judgment. However, the Court declined to make a vesting order in his favour, because he did not satisfy the condition at section 1017(3) of the Companies Act: the evidence was that his liabilities under the mortgage were £392,000, whereas the value of the lease was between £800,000 and £1 million. As such, there was not a “reasonable relationship between Mr Leon’s liability and the benefit to be obtained from a vesting order”: see paragraph [46] of the judgment.[33]The Claimants say that they satisfy limb 2 because they are subject to liabilities under their undischarged leases of the Property, in the form of their tenant covenants, and because there is a reasonable relationship between the extent of those liabilities and the value of the freehold interest in the Property, which is said to be of low or nominal value. I do agree with those submissions.[34]As to whether the Claimants are “under a liability in respect of the disclaimed property that is not discharged by the disclaimer”, I do not consider that the Claimants’ liabilities to their landlord under the terms of their leases are liabilities “in respect of” the freehold interest which has been disclaimed. Those liabilities arise under the lease of the Property. They are the burdens which the Claimants took on when they acquired their leases of Flats 1 and 2 in the Property. They are not liabilities in respect of the freehold interest per se.[35]In any event, the Claimants do not satisfy the precondition at section 1017(3) for the making of a vesting order. That is because:a. While the Claimants have submitted that the Company’s freehold interest in the Property was of “low or nominal value”, it is impossible for me to accept that. The Claimants did not adduce any evidence to show the value of the freehold interest. At the hearing, counsel for the Claimants sought permission to adduce such evidence, which I refused. I did so, not simply because it was too late and would have been clearly contrary to the overriding objective to adjourn and relist the disposal hearing simply to permit such evidence to be obtained, but because all available evidence demonstrates that the freehold interest has much more than a nominal value. The freehold interest in the Property was originally acquired by the Company for £60,000 in 2005. Even assuming that the value of the Property had remained static in the intervening 20 years, the value of the freehold interest would have inevitably increased since that time, simply because the leases in the Property are 20 years closer to expiry. The freehold interest in the Property is manifestly of more than “low or nominal” value.b. Conversely, the liabilities imposed on the Claimants by the terms of their leases are clearly not of the same order of magnitude. I accept that the Claimants as tenants are subject to some liabilities – they are required to pay a “basic rent” of £25 per year for Flat 1, and Mrs Lulham is required to pay rent on Flat 2 at a yearly rent of £200 for the first 33 years and £400 for the next 33 years and £800 for the remainder of the term, as well as a service charge calculated by reference to the landlord’s reasonable service costs. However, it is impossible to conclude that these liabilities bear a sufficiently proportionate relationship to the value of the freehold interest that it could be said that the vesting of the freehold interest in the Claimants would be just “for the purposes ofcompensating [them]” for remaining subject to those ongoing liabilities.c. The Claimants also submitted that the value of the freehold interest “is commensurate with the difficulties (and consequent impact on market value) of the absence of any landlord to perform the management and maintenance services to which [the Claimants] are contractually entitled.” The suggestion is that the Claimants should be compensated because their leases have been rendered less valuable by having no landlord to perform the landlord’s covenants, and by the impact on the market value of the leases of the legal uncertainty created by the disclaimer. While I accept that the Claimants are subject to those difficulties, they do not seem to me to be relevant to the precondition at section 1017(3) of the Companies Act, which requires the Court to compare the value of the disclaimed property with the level of the liability to which the applicant remains subject.[36]I therefore cannot make a vesting order under limb 2 of section 1017 of the Companies Act. (c). s.181 of the Law of Property Act[37]I turn finally to the jurisdiction under section 181 of the Law of Property Act, which enables the Court to create a new legal estate in property that belonged to a dissolved company, and to vest it in the person “who would have been entitled to the estate which determined had it remained a subsisting estate.”[38]The Claimants submit that they “would have been entitled” to the Company’s freehold interest in the Property, because they were the sole shareholders and directors in the Company, such that they could have compelled the Company to transfer the freehold in the Property to them personally.[39]In Lizzium v Crown Estate Commissioners, Master Clark considered earlier decisions of the Court in UBS Global Asset Management (UK) Limited v Crown Estate Commissioners [2011] EWHC 3368 (Ch) and in Quadracolour Limited v Crown Estate Commissioners [2013] EWHC 4842 (Ch). I respectfully agree with her analysis of those authorities, and with her conclusion (at paragraph [55] of her judgment) that an applicant under section 181 must show that he is “entitled as a matter of a legal right subsisting at the date of the escheat, even if some further steps need to be taken to achieve an enforceable entitlement to the property.” In the UBS and Quadracolour cases, that subsisting legal right consisted in each case of a right under a binding option agreement with the dissolved company, with the contractual right in Quadracolour requiring a contractual process to be gone through to exercise the option.[40]In this case, the Claimants had no subsisting legal right to the Company’s interest in the Property. As directors, they had the power, subject to their fiduciary duties, to manage the Company’s assets. As shareholders, they had various rights, including to seek to wind up the Company and to have its surplus assets (after payment of its creditors) paid to them as its members. But none of those rights constitutes a subsisting legal right in the Property at the date of the Company’s dissolution. Per the Court of Appeal’s decision in Leon v Attorney General, which I have referred to at paragraph 26 above, to attribute the Company’s interest in the Property to the Claimants because they were the Company’s shareholders would necessarily involve an unjustified piercing of the corporate veil.[41]I therefore conclude that I cannot create and vest a freehold estate in the Property in the Claimants pursuant to section 181 of the Law of Property Act.

Conclusion

[42]I have given careful consideration to the extent of the Court’s jurisdiction, and I have reached the conclusion set out above with some diffidence. That is because I recognise that it would be highly convenient for the Court to be able to assist the former shareholders of dissolved companies in a situation such as this. However, I have concluded that the Court’s various statutory jurisdictions do not extend far enough to enable me to vest the freehold of the Property in the Claimants.[43]I therefore dismiss the application.

Cited in 1 later judgment