Quistclose Investments Ltd v Rolls Razor Ltd ((in Liquidation))


[1968] UKHL J1031-3


Lord Reid

Lord of Morris Borthy-y-Gest

Lord Guest

Lord Pearce

Lord Wilberforce

Barclays Bank Limited
Quistclose Investments Limited
Lord Reid

My Lords,


I agree with the speech of my noble and learned friend, Lord Wilberforce. I would only add that I am by no means satisfied that this House would be precluded from holding, in such circumstances as exist in this case, that notice of the trust received by the Bank after they had received the money could be effective.


I would dismiss this appeal.

Lord Morris of Borth-y-Gest

My Lords,


I am in agreement with the speech of my noble and learned friend, Lord Wilberforce, which I have had the advantage of reading.


I would dismiss the appeal.

Lord Guest

My Lords,


I have had the advantage of reading the opinion of my noble and learned friend, Lord Wilberforce. I agree with it and would dismiss the appeal.

Lord Pearce

My Lords,


I have had the advantage of reading the opinion of my noble and learned friend, Lord Wilberforce. I entirely agree with it. Accordingly, I would dismiss the appeal.

Lord Wilberforce

My Lords,


The events with which the present appeal is concerned took place in the final weeks preceding the collapse of Rolls Razor Ltd., an enterprise of which the moving spirit was Mr. John Bloom. The Company's audited accounts for the year 1963 showed a considerable trading profit: an interim dividend of 80 per cent, had been paid, and the figures admitted of the payment of a substantial final dividend. On 14th May, 1964, the Directors, at a Board meeting, agreed to recommend a final payment of 120 per cent. But the Company had no liquid resources to enable it to pay this dividend, which required a net sum, after deduction of tax, of £209,719 8s. 6d. On 4th June, 1964, its overdraft with the Appellant Bank was £485,000, against a limit of £250,000, and on that day the Bank by letter to Mr. Leslie Goldbart, one of the Directors, required this situation to be rectified, and stated that it would be unable to help in the payment of the final dividend unless this was made within the overdraft limit of £250,000.


The Annual General Meeting of Rolls Razor Ltd. was held on 2nd July, 1964, and payment of the 120 per cent, dividend was approved. No date was fixed by the approving resolution, but the Directors contemplated that payment would be made on 24th July. Approval of the dividend made the Company a debtor in respect of the net amount to its shareholders. Provision of the sum required to pay it, as also of finance to enable the Company to continue trading, was the subject of negotiations by Mr. Bloom during the early part of July. He succeeded in obtaining the money needed to pay the dividend from the Respondent Company, which he owned or controlled. At a Board meeting of the latter held on 15th July, 1964, it was resolved that a loan of £209,719 8s. 6d. be made to Rolls Razor Ltd. “for the purpose of that Company paying the final dividend on 24th July next”. On the same day, a cheque for that sum was drawn by the Respondent Company in favour of Rolls Razor Ltd. Rolls Razor Ltd. sent this cheque to the Appellant Bank's City Branch Office together with a covering letter on the notepaper of Rolls Razor Ltd., also dated 15th July, 1964, signed by Mr. Goldbart and addressed to Mr. G. H. Parker, a joint Manager of that Branch in the following terms: —

“Dear Mr. Parker,

Confirming our telephone conversation of to-day's date, will you please open a No. 4 Ordinary Dividend Share Account.

I enclose herewith a cheque valued at £209,719 8s. 6d…. being the total amount of dividend due on the 24th July 1964. Will you please credit this to the above mentioned account.

We would like to confirm the agreement reached with you this morning that this amount will only be used to meet the dividend due on the 24th July 1964.”


From an answer to an interrogatory administered to the Bank in the course of the action, it appeared that, in the telephone conversation referred to in this letter, Mr. Goldbart had informed Mr. Parker that arrangements had been made with an unspecified person to lend or otherwise provide money for the purpose of paying the dividend due to be paid by Rolls Razor Ltd. on 24th July, 1964.


The Appellant Bank had, on 8th June, 1964, opened an Ordinary Dividend No. 4 account. The Respondents' cheque for £209,719 8s. 6d. was specially cleared and credited to this account on 17th July, 1964. Mr. Bloom was unable to raise further sufficient finance and on 17th July, 1964, the Directors of Rolls Razor Ltd., resolved to put the Company into voluntary liquidation; the Appellant Bank was so informed. On or about 20th July it amalgamated all the accounts of the Company except the Ordinary Dividend No. 4 account. On 5th August, 1964, the Respondent's solicitors demanded repayment from Rolls Razor Ltd. of the sum of £209,719 8s. 6d. but repayment was not made and no demand at this time was made upon the Appellant Bank. The effective resolution for the liquidation of Rolls Razor Ltd. was passed on 27th August, 1964, and on the following day the Appellant Bank set off the credit balance on Ordinary Dividend No. 4 account against part of the debit balance on Rolls Razor Ltd.'s other accounts. There followed in due course demand by the Respondents for repayment of this sum by the Bank and the present proceedings.


Two questions arise, both of which must be answered favourably to the Respondents if they are to recover the money from the Bank. The first is whether as between the Respondents and Rolls Razor Ltd. the terms upon which the loan was made were such as to impress upon the sum of £209,719 8s. 6d. a trust in their favour in the event of the dividend not being paid. The second is whether, in that event, the bank had such notice of the trust or of the circumstances giving rise to it as to make the trust binding upon them.


It is not difficult to establish precisely upon what terms the money was advanced by the Respondents to Rolls Razor Ltd. There is no doubt that the loan was made specifically in order to enable Rolls Razor Ltd. to pay the dividend. There is equally, in my opinion, no doubt that the loan was made only so as to enable Rolls Razor Ltd. to pay the dividend...

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