L - Letters of comfort
27/3/13
CARILLION CONSTRUCTION LTD v HUSSAIN [2013] EWHC 685 (Ch)
Letters of support addressed by a parent company to directors of a subsidiary stated that the parent would provide financial and business support to the subsidiary to ensure it continued as a going concern. On their true construction the letters did not give rise to obligations enforceable in law. They were only intended to enable the directors of the subsidiary to consider whether it was appropriate for financial statements to be prepared on a going concern basis. They did not purport to be a contract and gave no indication that any consideration had been given. As a result a creditor of the subsidiary had no real prospect of proving that the subsequent withdrawal of support was a transaction intended to defraud creditors within s 423 Insolvency Act 1986. The assertion that there had been a deal to release the parent from liability was based on speculation in the absence any evidence that the companies had ever considered the letters binding.