Problem Question) in Law of Equity and Trust

You act for the liquidators of Concept Bathrooms Ltd (a?Concepta?), which went into liquidation last month.

(a) A month ago, HM Revenue and Customs discovered some irregularities in Conceptas tax returns and demanded immediate payment of A?60,000. Fergus, Conceptas finance director, persuaded his wealthy son, James, to provide the money. James lent Concept A?60,000 a?on the express understanding that it is to be used to pay the tax due and for no other purpose whatsoevera?. Concept paid the money into a bank account, opened especially for that purpose, but shortly afterwards, Concept went into liquidation and, as a result, the sum cannot be paid to HM Revenue and Customs.

Explain whether the A?60,000 is held on trust for James and what will happen to the money.

(b)The liquidator also seeks your advice on whether Concept has any claim in respect of the activities of Gerard, its managing director.

It appears that a year ago, Gerard entered into a contract, on his own account, to supply bathroom fittings to his friend, Robert, a builder. Robert said that he did not want to use Concept because he had heard that the company was struggling. Gerard has made a considerable profit from the deal.

Gerard also accepted a?commissiona? from a supplier, Wydon Tap Co., in respect of the many orders placed by Concept over a number of years.

Explain whether Concept can bring any claims against Gerard and whether they are likely to be successful.