The borrower, which was not in liquidation and made no claim to the money, was the parent company of a group one of whose subsidiaries was in financial difficulty. There was a danger that if it were wound up or ceased trading it would bring down the whole group. A consortium of the group’s banks agreed to put up a fund of more than andpound;500,000 in an attempt to rescue the subsidiary. They paid the money into a special account in the name of the parent company for the express purpose of ‘providing money for the subsidiary’s unsecured creditors over the ensuing weeks’ and for no other purpose. The banks’ object was to enable the subsidiary to continue trading, though on a reduced scale; it failed when the subsidiary was put into receivership at a time when some andpound;350,000 remained unexpended.
Held: The primary trust was a purpose trust enforceable (inter alios) by the subsidiaries’ creditors as the persons for whose benefit the trust was created.
Judges:
Sir Robert Megarry V-C
Citations:
Unreported, 6 October 1978
Jurisdiction:
England and Wales
Insolvency
Updated: 08 May 2022; Ref: scu.556781