Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd
| Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd | |
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| Court | Court of Appeal |
| Full case name | Sinclair Investments (UK) Ltd (Appellant) v Versailles Trade Finance Limited (in administrative receivership), Versailles Group Plc (in administrative receivership), National Westminster Bank Plc, Anthony V Lomas, Robert Birchall and Royal bank of Scotland Plc (Respondents and Cross-appellants) |
| Decided | 29 March 2011 |
| Citation(s) | [2011] EWCA Civ 347, [2011] 3 WLR 1153 |
| Case history | |
| Prior action(s) | Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd & Ors [2010] EWHC 1614 (Ch) (30 June 2010) |
| Court membership | |
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Overruled by
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| FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45 | |
| Keywords | |
| Constructive trust | |
Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347 is an English trusts law case, concerning constructive trusts. Sinclair (in so far as it relied on or followed Heiron and Lister) was overruled in July 2014 by the United Kingdom Supreme Court in FHR European Ventures LLP v Cedar Capital Partners LLC.
Between 1995 and 1999 various investors, including Sinclair Investments (UK) Ltd, paid money to Trading Partners Ltd to carry out trades in goods. Mr Cushnie was the director, transferred the money to another company he owned called Versailles Trade Finance Ltd, which was meant to engage in the factoring business. Instead, Versailles fraudulently used the money partly simply to pay ‘profits’ to traders, but also was stolen by Mr Clough, or circulated around other companies so as to appear that genuine business was taking place. Mr Cushnie sold his shares for £28.69m in 1999. Of this money, £9.19m went to the Versailles group, £1m to Mr Clough, £1.75m to traders, £2.25m loan repayment to NatWest, and £11.47m to RBS, of which £1.49m was an overdraft repayment and £9.98m was repayment of the loan secured on the Kensington property. Versailles was discovered, and it was put into receivership. Trading Partners Ltd had lost money because of Versailles activities, and was also put into liquidation in July 2000.
On behalf of creditors such as Sinclair, Trading Partners Ltd (now run by the liquidator) claimed a proprietary interest in Mr Cushnie’s profits from the sale of shares under a constructive trust. Versailles and the banks argued that they could exercise a bona fide purchaser defence. It also claimed to be entitled to the money that passed from Trading Partners to Versailles and were mixed with Versailles’ money, which could be traced into the banks’ hands.
Cushnie and Clough were sentenced to jail for six years each (Clough reduced to five) and were disqualified from being directors for 15 and 10 years respectively.
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