Insolvent borrowers: is there a trust?

An issue that commonly comes before the courts in insolvency situations is whether a lender that has advanced money to the now insolvent borrower has retained a ‘security interest’ in the monies advanced, so that the monies are held in a trust for the benefit of the lender (termed a Quistclose trust). This would mean, therefore, that the monies held in the trust are not available for distribution in the insolvency proceedings as part of the insolvent borrower’s estate. This in turn involves a consideration of the detailed provisions of the loan agreement. A recent case has emphasised the importance of getting the drafting right.

In Gabriel v Little, the lender had advanced money to a property developer. The relevant provision of the facility letter in issue defined the term ‘loan’ as ‘the sum of £200,000, which will be made available as a contribution to the costs of development of the property, such sum to be advanced on the drawdown date’. The stipulated purpose of the loan was ‘to assist with the costs of development of the property’…

Click on the link below to read the rest of the Walker Morris briefing.

Sign in or Register to continue reading this article

Sign in

Register

It's quick, easy and free!

It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.

Register now

Why register to The Lawyer

 

Industry insight

In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.

 

Market intelligence

Identify the major players and business opportunities within a particular region through our series of free, special reports.

 

Email newsletters

Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.

More relevant to you

To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.

Briefings from Walker Morris

View more briefings from Walker Morris

Analysis from The Lawyer

View more analysis from The Lawyer

Overview

Kings Court
12 King Street
Leeds
LS1 2HL
UK
http://www.walkermorris.co.uk

Turnover (£m): 42.50
No. of lawyers: 188