Barclays Bank V. Quitclose Investment Notes

Barclays Bank v. Quitclose Investments

Facts

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. On May 14, 1964, the directors, at a board meeting, agreed to recommend a final payment of dividend 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 June 4, 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.

Loan from Quitclose Investments: Mr. Bloom 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 July 15, 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 due on July 24 next."

Cheque deposited in Barlcays Bank: 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 July 15, 1964, signed by Mr. Goldbart and addressed to Mr. G. H. Parker, a joint manager of that branch, in the following terms:-

I enclose herewith a cheque valued at 209,719 8s. 6d. ... being the total amount of dividend due on July 24, 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 July 24, 1964.

Insolvency and demand by Quitclose for repayment: The respondents' cheque for 209,719 8s. 6d. was specially cleared and credited to this account on July 17, 1964. Mr. Bloom was unable to raise further sufficient finance and on July 17, 1964, the directors of Rolls Razor Ltd., resolved to put the company into voluntary liquidation; the appellant bank was so informed. On or about July 20, it...

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