Re Augustus Barnett & Son Ltd [1986] BCLC 170

Court: High Court

Facts: Augustus Barnett & Son Ltd, a UK subsidiary, received comfort letters from its Spanish parent company, assuring financial support. When the parent withdrew support, the subsidiary went into liquidation. Liquidators claimed fraudulent trading due to misleading comfort letters.

Issue: Does the withdrawal of financial support from a parent company constitute fraudulent trading when comfort letters were initially issued with honest intent?

Held: Claim dismissed. The court found that the parent company’s initial support was given with honest intent and the subsequent withdrawal was not fraudulent.

Key Judicial Statement: The court noted, "The withdrawal of support was not fraudulent if the comfort letters were issued with honest intent."

💡 Leveluplaw: Fraudulent trading claims require evidence of dishonest intent, and a parent company’s withdrawal of support is not automatically deemed fraudulent if initial support was honest.