A resolution or order for winding up of a company divests it of the beneficial interest in its assets. They become a fund which the company thereafter holds in trust to discharge its liabilities. Where a company is wound up in this country, its assets are held on terms that they must be applied in accordance with that statutory insolvency regime.
Lord Diplock spoke of the use of the expression ‘trust’ and ‘trust property’ in reference to the assets of a company in liquidation: ‘All that was intended to be conveyed by the use of the expression ‘trust property’ and ‘trust’ in these and subsequent cases (of which the most recent is Pritchard v. M.H. Builders (Wilmslow) Limited [1969] 1 WLR 409) was that the effect of the statute was to give to the property of a company in liquidation that essential characteristic which distinguished trust property from other property, viz., that it could not be used or disposed of by the legal owner for his own benefit, but must be used or disposed of for the benefit of other persons.’
Lord Diplock referred to the legal ownership of property subject to a trust as held by the trustee ‘not for his own benefit but for the benefit of the cestui que trust or beneficiaries’, but went on to say that: ‘Upon the creation of a trust in the strict sense as it was developed by equity the full ownership in the trust property was split into two constituent elements … the ‘legal ownership’ in the trustee, what came to be called the ‘beneficial ownership’ in the cestui que trust.’
Judges:
Lord Diplock
Citations:
[1976] AC 167
Jurisdiction:
England and Wales
Cited by:
Cited – Buchler and another (as joint liquidators of Leyland DAF Limited) v Talbot and another (as joint administrative receivers of Leyland DAF Limited) and Stichting Ofasec and others HL 4-Mar-2004
The liquidator sought to recover his expenses from assets charged under a floating charge in priority to the chargee.
Held: Barleycorn was decided in error. The liquidators costs incurred in an insolvent winding up were not to be charged . .
Cited – McGrath and others v Riddell and others HL 9-Apr-2008
(Orse In Re HIH Casualty and General Insurance Ltd)
HIH, an Australian Insurance company, became insolvent. An order was sought for the collection and remission of it assets in England under a letter of request from the Australia Court.
Cited – Cambridge Gas Transport Corp v Official Committee of Unsecured Creditors (of Navigator Holdings Plc and Others) PC 16-May-2006
(Isle of Man) A scheme of arrangement was proposed for a company with involvement in several jurisdictions. An order in New York sought assistance in the vesting of shares and assets in the Isle of Man in the creditors committee. Cambridge was a . .
Cited – Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd and Another SC 27-Jul-2011
Complex financial instruments insured the indebtedness of Lehman Brothers. On that company’s insolvency a claim was made. It was said that provisions in the documents offended the rule against the anti-deprivation rule. The courts below had upheld . .
Cited – Akers and Others v Samba Financial Group SC 1-Feb-2017
Saad Investments was a Cayman Islands company in liquidation. The liquidator brought an action here, but the defendant sought a stay saying that another forum was clearly more appropriate. Shares in Saudi banks were said to be held in trust for the . .
Lists of cited by and citing cases may be incomplete.
Company, Insolvency, Trusts
Updated: 17 July 2022; Ref: scu.194248
