Flashcards
Quistclose trust
Cards in this deck (17)
- 1Quistclose trustUsed to described a trust in which money is lent to an individual or company for a specific purpose.
- 2Barclays Bank v QuistcloseQUESTION: Who did the money in the Barclays account belong to? Barclays claimed that it belonged to them (overdraft). Quistclose would only have a better claim to it if the money was held on trust.
- 3Barclays Bank v QuistcloseJUDGEMENT: Wilberforce held that the money belonged to Quistclose. When a loan is made for a specific purpose, a trust is created meaning that the funds could only be made for the specific purpose. When the purpose failed, the money was returned to the lender.
- 4Criteria for Quistclose trust1. The money borrowed was for a specific purpose
2. The funds were kept in a separate bank account
3. The bank where the account is kept must have notice of the purpose of the loan. - 5Lord Wilberfore - What type of trust is it?Held that the trust consisted of both a primary and secondary trust.
Primary - in favour of shareholders
Secondary - In favour of lender were purpose fails. - 6Lord Wilberforce (type of trust) CriticismWilberforce did not specify the types of trusts that the primary/secondary trusts are. Therefore, led to much speculation
- 7Re EVTRJudges suggested that the primary trust was constructive and secondary trust resulting.
However, constructive trust must include unconscionable conduct. Where was this in Quistclose? - 8Re Northern DevelopmentsPrimary trust was express but in the form of Re Denley.
How could an express trust in the form of Re Denley work when the loan is for a purpose only? - 9Peter Millet - 'The Quistclose Trust: Who can enforce it?'If the shareholders were equitable owners, why could they not enforce the trust?
Rolls Razor were only ever the beneficial owners. There was no reason that they could not have paid the money to the shareholders.
Questioned whether the evaluation of unsecured creditors to being in effect secured creditors with a beneficial interest. - 10Twinsectra v Yardley (Lord Millett)The uncertainties of the Quistclose trust were addressed in this case.
- 11Where does the beneficial interest go?Lord Millet hypothesised 4 possibilities of where the interest could lie;
1. Vested in the borrower
2. Vested in the beneficiary
3. In suspense
4. Remained with the lender - 121. Vested in the borrowerInconsistent with Toovey v Milne.
Defeated the purpose of the trust, namely preventing a trustee-in-bankrupcy from claiming the money. - 132. Vested in the beneficiaryEdwards v Glyn showed that possibility of beneficiary being abstract purpose. Therefore, this proposal offended the beneficiary principle.
- 143. Interest remains in suspenseMillett argued that this was an artificial possibility.
MOFFAT rejected argument - suspense is seen in discretionary trusts.
ROBERT MEGARRY - Exhibits willingness to accept this possibility. - 154. Remains with the lenderLord Millet held that this had to be the answer - when you have eliminated all possibilities, whatever remains, however improbable, must be the truth.
EN - Lender cannot retain rights normally attached to full beneficial interest. Also, as lender does not accrue any factual benefit.
EDWARDS - Decision was reached without good sense or precedent. - 16What kind of trust is a Quistclose trust?Lord Millett held that the trust was a resulting trust but would be subject to the power to apply the monies in accordance with the stated purpose.
- 17Resulting trust criticismBARNETT - Leaves questions unanswered what type of trust is qualified as (presumed or resulting).
EDWARDS - Does not seem to fall within conventional resulting trust.
Resulting trust means interest results/jumps back, How can this be when lender retains the interest?
Why did Lord Millett digress from his original statement that it was a express trust.
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- Equity and Trusts (Block 2 - Quistclose trust) Flashcards on Quistclose trust , created by Chantal Briancon on 24/04/2018.
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- Chantal Briancon
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