Tradegro (UK) Ltd v Wigmore Street Investments Ltd & Anor

A solicitor’s undertaking to hold money and deal with it in accordance with specified terms may create both a trust and a personally enforceable solicitor’s undertaking. Its origin in threatened freezing-injunction proceedings does not make it equivalent to a defendant’s undertaking not to dissipate assets. The court must construe the undertaking commercially. Where the agreed trigger for payment has occurred, the undertaking may require payment even if its drafting does not expressly state that obligation. Administration of the solicitor’s client does not release the solicitor from the undertaking or entitle the client’s insolvency estate to the money.

Tradegro had paid approximately £647,000 to satisfy a judgment debt owed to Wigmore Street Investments Ltd, while an additional consideration claim under the parties’ share purchase agreement remained outstanding. The money was placed in Olswang LLP’s client account under an undertaking to hold it pending satisfaction of the additional consideration, subject to Tradegro’s written consent or an order of the court.

Wigmore Street Investments subsequently entered administration. The additional consideration was determined to be approximately £2.4 million but remained unpaid. Tradegro applied for payment of the money. The issue was whether Olswang held it as stakeholder or trustee, whether the undertaking was merely analogous to a freezing injunction, and whether the undertaking required payment to Tradegro.

1. Nature of the money. Tradegro had transferred ownership of the money to Wigmore Street Investments when it paid the judgment debt. It therefore had no set-off or proprietary claim to the money merely because the additional consideration exceeded the judgment debt.
2. Effect of the undertaking. The undertaking was materially different from the undertaking considered in Flightline Ltd v Edwards [2003] 1 BCLC 427 (CA). It was given by Olswang as solicitors, and required them to retain and deal with specified money. The threatened freezing injunction explained the background but did not define the legal effect of the undertaking.
3. Stakeholder analysis. The stakeholder doctrine required the relevant bilateral contract between the principals and a separate tripartite contract governing the deposit. Following Gribbon v Lutton [2002] QB 902 (CA) and Manzanilla Ltd v Corton Property and Investment Ltd (unreported, 13 November 1996), the judge held that a stakeholder ordinarily holds money under contractual, not fiduciary, obligations. Those requirements were not satisfied here because the money was paid to discharge a judgment debt, rather than under a contract making it a stakeholder deposit.
4. Trust and solicitor’s undertaking. The arrangement created a trust under which Olswang held the money for distribution in accordance with the undertaking. The letter also constituted a separate solicitor’s undertaking, personally enforceable against Olswang. The administration of Wigmore Street Investments did not affect that relationship.
5. Payment. The additional consideration had been determined but not satisfied. Construing the undertaking commercially, it implicitly required Olswang to pay the money to Tradegro in full or partial settlement of the additional consideration. Payment would discharge the undertaking. The money was therefore payable to Tradegro.