Automatic Resulting Trusts: Quistclose Trusts A resulting trust will arise where property is transferred on trust for a specified purpose and the purpose fails. However, a resulting trust will not arise where a donor has parted with his property in pursuance of some contract, except in rare cases such as that of Barclays Bank v Quistclose Investment which is discussed in full below.
While it is possible to identify significant differences between the concepts of a debt and a trust, they are not always mutually exclusive. As Bingham J. stated in Nestle Oy v Lloyd’s Bank plc the existence of a contractual obligation to pay a debt is not necessarily inconsistent with the parallel existence of a trust in favour of a creditor. If a lender loans money to a borrower subject to the condition that it is to be kept in a separate bank account and employed for a specific purpose, such an agreement may give rise to a trust. A further question arises when, for whatever reason, the money cannot be used for the purpose laid down. It appears that in such a circumstance, a primary purpose trust coupled with a secondary resulting trust for the benefit of the lender will arise. The Quistclose case is instructive. Here, a company called R Ltd. that was in financial difficulty borrowed a sum of money from Quistclose for the purpose of paying a dividend to the shareholders, with the explicit instruction that the money was only to be used for this purpose. Indeed a separate bank account was set up for the purpose. Before the dividend was paid, R Ltd went into liquidation and the money in the account was claimed by both Quistclose and Barclays. The House of Lords held that the money had been paid into the account on trust for the purpose of paying the dividend and that since the purpose could not now be achieved, it was held on resulting trust for Quistclose. If this primary resulting trust in favour of the creditors, Quistclose, failed, then a secondary resulting trust in favour of Barclays would have arisen. As Lord Wilberforce stated: The loan for the express purpose of ensuring the payment of the dividend gave rise to a relationship of fiduciary character or trust in favour, as a primary trust, of the creditors and secondarily if the primary trust failed of the third person namely the institution which had made the loan. In such cases it is not necessary that the term trust is used provided the conditions outlined above, namely in relation to segregation of the funds and specifying the purpose for their use, have been complied with. Chambers points out that a resulting trust arises not because the lender intended such a trust, but rather because the lender did not intend the borrower to retain the monies in the events that transpired. The Quistclose principle it seems is not limited to situations where money is loaned for the purpose of paying creditors, and can apply where a loan is paid to another on condition that it is used for a particular purpose, and it transpires that the purpose cannot be fulfilled. On Feb 28, 12:59 am, Fairy84 <[email protected]> wrote: > Please help me with this! Any notes would be perfect! --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "FE-1 Study Group" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.ie/group/FE-1-Study-Group?hl=en-GB -~----------~----~----~----~------~----~------~--~---
