RaceTech plc is engaged in the business of designing and manufacturing high-performance racing cars. It wishes to build a racetrack upon which it can test its prototype models, and to that end, it creates a subsidiary company called RaceTrack Ltd. A suitable piece of land on which to build the testing track is located and RaceTrack purchases it using capital borrowed from RaceTech. However, shortly thereafter, the directors of RaceTrack (all of whom are also directors of RaceTech) discover that the land does not have planning permission and so RaceTrack agrees to sell the land to SkyCorp Ltd, a local construction company. However, several days later, a member of the local council indicates to the directors of RaceTrack that, should it apply for planning permission, it would certainly be granted. Accordingly, before sale of the land to SkyCorp is completed, RaceTrack transfers ownership of the land to RaceTech, and argues that the contract with SkyCorp is no longer valid as it no longer owns the land.

RaceTrack successfully applies for planning permission.