Jurisdiction(s):
United Kingdom

Bond proceeds on express or Quistclose trust; bondholders joined; mandatory injunction refused: English Commercial Court in Eraaya Lifespaces v Elara Capital [2025]

Published on: 01 July 2025

Published by a LexisNexis Banking & Finance expert

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Article summary

Eraaya Lifespaces Ltd v Elara Capital Plc and other companies [2025] EWHC 1506 (Comm)

What are the practical implications of this case?

This judgment confirmed that, when a settlement agent or comparable intermediary receives monies from bondholders destined for an issuer, and lacks any unfettered authority to deal with those monies, being obliged instead to follow another party’s directions, that intermediary will typically hold the monies on trust, for the bondholders or alternatively the issuer, pending distribution to the intended recipient in due course. Depending on the facts, the trust may take the form of an express trust or a Quistclose trust; it is immaterial whether documentation or written terms explicitly describe it as a trust, or whether the intermediary has been told it is holding the funds on trust. The court must decide, on the evidence, the character of the trust and the identity of its beneficiary or beneficiaries, as circumstances require. In reaching that conclusion, the court may review pertinent contractual terms and, where apt, have regard to pre-execution communications between the parties that shed light on their intentions.

What was the background?

Eraaya Lifespaces Ltd (the issuer), an Indian-incorporated company, retained Elara Capital Ltd (the financial adviser)

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