That Comfort Letter May Be Of Limited Comfort

​Punj Lloyd Ltd (PLL), the ultimate parent of Simon Carves Ltd (SCL), provided 'letters of support' (what would in North America be called 'comfort letters') indicating to the board of SCL that PLL would 'provide the necessary financial and business support to ensure that [SCL] continues as a going concern'. This is precisely what SCL did not do: it went into administration, leaving invoices unpaid and unsecured creditors largely out of luck. One of those creditors, Carillion Construction, claimed that PLL's letters of support created enforceable obligations between parent and sub, and that by failing to enforce them SCL had defrauded its creditors: In the matter of Simon Carves Ltd, [2013] EWHC 685 (Ch).

Sir William Blackburne in the Chancery court held that the letters were not binding on SCL, noting that cases involving comfort or support letters turn on their individual facts. The fact that the letters were addressed to SCL's board, and not to the company itself, was significant -- as was the fact that they were provided in the course of the...