In the appeal case of ELB Securities v Alan Love and Prestwick Hotels Limited, the owner of a hotel failed to overturn the decision of the court that its lease with a landlord ended on dissolution. The case will have significant implications for companies and company law.
ELB Securities Limited was the owner of commercial premises on Buchanan Street, Glasgow which it leased to Prestwick Hotels Limited. Prestwick Hotel Limited was subsequently dissolved and struck off the Companies Register as a result of failure to comply with its statutory obligation to lodge accounts with Companies House over a six year period.
The Companies Act 2006 dictates that where a company is dissolved, the company property become ‘bona vacantia’ or ownerless and falls to the Crown to decide whether or not to keep the property.
The Crown’s representative in Scotland for dealing with such property, The Queen’s & Lord Treasurer’s Remembrancer, issued a notice indicating that the Crown had no interest in the lease.
As a result, ELB sought to recover possession of the property through a court action in Glasgow Sheriff Court. However at the same time, Prestwick Hotels Limited was restored to the Companies Register by order of a Sheriff at Hamilton Sheriff Court. As a result, Prestwick Hotels Limited joined the court action in Glasgow. Prestwick Hotels Limited argued that is it had been restored to the register, the Companies Act 2006 dictated that it was to be treated as if it had never been struck off. If this were the case, the lease would remain in force and thus ELB would have no basis for their claim to recover the property.
The other side argued that the notice of disclaimer from the Crown effectively terminated Prestwick Hotels Limited’s interest in the lease, making it’s restoration to the register irrelevant in the case. The Sheriff at this stage sized with Prestwick Hotels Limited and dismissed ELB’s recovery action. The decision was appealed by ELB and the Sheriff Principal in Glasgow determined that in fact the lease had been terminated by the Crown disclaimer. The result was that ELB was able to recover possession of the premises. Prestwick Hotels Limited appealed to the court of Session but their argument was rejected and it was held that the Crown notice of disclaimer terminated the lease under the law.
Both the Sheriff Principal and the Judges in the Court of session determined that accepting the argument of Prestwick Hotels Limited would mean disregarding the special provisions of the Companies act 2006 that related to the companies property which qualified the effect of the Prestwick Hotels Limited being restored to the Company Register. The Sheriff Principal and the Court of Session judges felt that such a decision would result in uncertainty and confusion. If they had decided differently, the restoration of a company to the register would result in restoration of the company’s transactions, contracts, leases titles and loans and parliament when making the law parliament cannot possibly have intended this result.
This interpretation of the law would also create uncertainty for landlords as for a significant amount of time after the dissolution of a company, they would be unsure as to whether the company would be restored and could reclaim their property from the tenant in situ.
The decision could be appealed to the Supreme Court however at present the outcome may act as a warning to all companies who do not meet statutory requirements. Although the company may be restored to the register, where companies do not abide by the law they may not rely on restoration to reclaim assets lost as a result of the offence.
Emma Flood Curated Media
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