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Quistclose trusts in English law

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579:. Two problems with this are that it has not been upheld by the English courts, and that the courts would require those explicit terms to be part of the contract; Hudson considers it the most advantageous however, because it would offer the simplest protection of the money by not requiring the contract to be breached for the trust to come into existence. In 467:, where money was lent by A to B, to pay off his debts. When B went bankrupt and returned the money to A, the courts held that the creditors could not recover this money, as it was held in a form comparable to a trust. Most situations in which a trust will arise require that a specific use of the money is identified by the contract. 28:-type trusts are a species of resulting trust which arise where property (usually money) is transferred on terms which do not leave it at the free disposal of the transferee. That restriction upon its use is usually created by an arrangement that the money should be used exclusively for a stated purpose or purposes. 546:, is that because the resulting trust only comes into existence after the misuse of the loan, it may come too late; if the money is not available when the claim is brought, there is no remedy. The borrower may already have spent the money, or already be insolvent and the subject of claims by creditors. 628:
to be that "equity fastens on the conscience of the person who receives from another property transferred for a specific purpose only and not therefore for the recipient's own purposes, so that such person will not be permitted to treat the property as his own or to use it for other than the stated
549:
Another flaw with both Wilberforce's and Millett's explanations is that if the interest is retained by the lender from the outset of the contract, it is not a resulting trust at all; the complete transfer of money should end the lender's equitable interest. It could be argued that the creation of a
589:, in that a loan agreement was made where the borrowers explicitly agreed to follow guidelines on the use of the money, something they failed to do. The Court of Appeal and the House of Lords refused to constitute any kind of trust or return the money however, applying Lord Wrenbury's judgment in 574:
trusts are express trusts. If the contract included a provision that the money was to only be used for certain purposes, it could be interpreted that this money is held on trust until it is used for those purposes. The borrower would be a trustee; using the money for any other purpose would be in
439:
in loans, through inserting a clause into the contract which limits the purposes for which the borrower can use the money. If the funds are used for a different purpose, a trust is created around the money for the benefit of the moneylender. This allows the moneylender to
123:
trust "probably ... the single most important application of equitable principles in commercial life", and further noting that despite 200 years of existence "it has resisted attempts by academic lawyers to analyse it in terms of conventional equitable doctrine".
31:
There must be an intention to create a trust on the part of the transferor. This is an objective question. It means that the transferor must have intended to enter into arrangements which, viewed objectively, have the effect in law of creating a trust."
501:
trust is an "illusory trust", where the apparent beneficiary (the moneylender, for example) takes no active role. This trust is created by the intention of either party, and is revocable at any time. The problems with this idea are that the facts in
537:
trust is a resulting trust, but held that the lender retains the interest throughout the transaction, with no need for this interest to reverse if the purpose of the loan fails. The problem with Wilberforce's analysis, as explained by
462:
situations, the intention must be to create a secondary trust for the benefit of the moneylender, arising if the "primary trust" (the appropriate use of the money) is not fulfilled. The idea of a primary and secondary trust comes from
65:
created where a creditor has lent money to a debtor for a particular purpose. If the debtor uses the money for any other purpose, then it is held on trust for the creditor. Any inappropriately spent money can then be
528:
in the loan. Under Wilberforce's two-stage trust, the interest in the money first goes from the lender to the borrower (the primary trust) and then, when the trust's purpose fails, reverses (the secondary trust). In
615:
situations, the requirement of "unconscionableness" could be met by the borrower using the money for a purpose other than the one for which it was lent, allowing the lender to claim an equitable interest in it. In
581: 444:
any inappropriately spent funds, and, in the case of the borrower's insolvency, prevents the money from being taken by creditors. The name and trust comes from the
479:
trusts is their categorisation within the accepted types of trust. The two-part trust structure (primary and secondary trusts) explained by Lord Wilberforce in
633:
trusts constructive in nature. However, no constructive trust could be created until the money is misused, which may be too late for an effective remedy.
284: 575:
violation of the trustee's duties, and so void. This trust would be created as soon as the contract is agreed, with the normal requirement for it to be
450: 159: 76: 361: 109:, illusory trusts. At least one textbook has been written dedicated solely to exploring issues around the true nature and classification of 506:
are not those of a normal illusory trust, and Millett failed to consider the mutual intention of the parties and any underlying contracts.
418: 576: 164: 92: 554:
trust is not based on the recovery of the original interest, but the creation of a new one. Doubts have also been raised about the
445: 71: 254: 249: 611:
trusts could be constructive trusts, which are created when the future trustee uses the money in an "unconscionable" manner. In
455: 996: 977: 320: 487:
trusts have variously been considered resulting, express or constructive in nature. An alternate explanation is given by
483:
does not appear elsewhere in English trusts law, and the type of trust used affects the rights available to the parties.
602: 154: 96: 346: 1042: 149: 515: 411: 182: 88: 264: 169: 488: 356: 289: 187: 116: 100: 1063: 404: 387: 351: 366: 493: 315: 244: 234: 105: 952: 259: 218: 441: 392: 330: 67: 46: 543: 8: 891: 203: 42: 525: 310: 239: 62: 1038: 992: 973: 593:, when he said that "such a stipulation will not amount to an equitable assignment". 436: 371: 269: 208: 135: 759: 1019: 687: 325: 279: 274: 539: 294: 558:
case in general, in that the facts of the case did not create a stereotypical
1057: 625: 1024: 1007: 80:(1970), although the underlying principles can be traced back further. 70:, and returned to the creditors. The name and trust comes from the 213: 953:"The Quistclose Trust: Intention and the Express Private Trust" 83:
There has been much academic debate over the classification of
562:
trust; this causes problems with applying Millett's analysis.
1008:"Conditional Payments and Insolvency – The Quistclose Trust" 629:
purpose"; this reference to "conscience" could make
618:
Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd
524:, stated that the contract gives the moneylender an 285:
Trusts of Land and Appointment of Trustees Act 1996
888:William Harrington Palmer vs Randal Westropp Carey 435:trust is a method by which a creditor can hold a 1055: 967: 842: 87:trusts in existing trusts law: whether they are 585:, the courts considered a situation similar to 684:Barclays Bank Ltd v Quistclose Investments Ltd 451:Barclays Bank Ltd v Quistclose Investments Ltd 77:Barclays Bank Ltd v Quistclose Investments Ltd 542:, Professor of Equity and Finance Law at the 412: 968:Edwards, Richard; Stockwell, Nigel (2007). 119:, writing extra-judicially, has called the 419: 405: 1023: 1005: 902: 719: 1032: 659: 648: 582:Swiss Bank Corporation v Lloyds Bank Ltd 255:Perpetuities and Accumulations Act 2009 250:Perpetuities and Accumulations Act 1964 1056: 986: 935: 914: 866: 854: 830: 818: 806: 794: 743: 731: 698: 671: 991:(6th ed.). Routledge-Cavendish. 950: 782: 770: 596: 533:Lord Millett also explained that a 13: 603:Constructive trusts in English law 509: 14: 1075: 972:(8th ed.). Pearson Longman. 470: 565: 20: 944: 929: 920: 908: 896: 881: 872: 860: 848: 836: 824: 812: 800: 788: 776: 764: 749: 570:The second possibility is that 516:Resulting trusts in English law 843:Edwards & Stockwell (2007) 737: 725: 713: 704: 692: 677: 665: 653: 642: 607:The third main theory is that 265:Recognition of Trusts Act 1987 1: 636: 127: 957:Monash University Law Review 624:trust principle was said by 290:Variation of Trusts Act 1958 7: 10: 1080: 1033:Swadling, William (2004). 1006:McCormack, Gerard (1993). 600: 513: 388:Conflict of laws of trusts 43:[2015] EWCA Civ 59 987:Hudson, Alastair (2009). 475:The primary problem with 367:Rule against perpetuities 16:Trust to trace lent money 951:Burns, Fiona R. (1992). 756:Twinsectra Ltd v Yardley 494:Twinsectra Ltd v Yardley 270:Statute of Frauds (1677) 245:Law of Property Act 1925 235:Charitable Uses Act 1601 106:Twinsectra Ltd v Yardley 260:Public Trustee Act 1906 892:[1926] UKPC 30 760:[2002] UKHL 12 710:(1819) 2 B&Ald 683 393:Hague Trust Convention 688:[1968] UKHL 4 520:Lord Wilberforce, in 1035:The Quistclose Trust 1025:10.5750/dlj.v9i1.245 544:University of Exeter 1037:. Hart Publishing. 1012:Denning Law Journal 497:; this is that the 458:maintained that in 160:Discretionary trust 97:constructive trusts 1064:English trusts law 597:Constructive trust 526:equitable interest 311:Account of profits 240:Charities Act 2006 155:Constructive trust 39:Bellis v Challinor 998:978-0-415-49771-8 989:Equity and Trusts 979:978-1-4058-4684-4 970:Trusts and Equity 437:security interest 429: 428: 372:Three certainties 362:Trustee liability 136:English trust law 52: 51: 1071: 1048: 1029: 1027: 1002: 983: 964: 939: 933: 927: 924: 918: 912: 906: 903:McCormack (1993) 900: 894: 885: 879: 876: 870: 864: 858: 852: 846: 840: 834: 828: 822: 816: 810: 804: 798: 792: 786: 780: 774: 768: 762: 753: 747: 741: 735: 729: 723: 720:McCormack (1993) 717: 711: 708: 702: 696: 690: 681: 675: 669: 663: 657: 651: 646: 456:Lord Wilberforce 421: 414: 407: 326:Equitable remedy 280:Trustee Act 2000 275:Trustee Act 1925 150:Charitable trust 132: 131: 89:resulting trusts 21: 1079: 1078: 1074: 1073: 1072: 1070: 1069: 1068: 1054: 1053: 1045: 999: 980: 947: 942: 934: 930: 925: 921: 913: 909: 901: 897: 886: 882: 877: 873: 865: 861: 853: 849: 841: 837: 829: 825: 817: 813: 805: 801: 793: 789: 781: 777: 769: 765: 754: 750: 742: 738: 730: 726: 718: 714: 709: 705: 697: 693: 682: 678: 670: 666: 660:Swadling (2004) 658: 654: 649:Swadling (2004) 647: 643: 639: 626:Peter Gibson J. 605: 599: 577:validly created 568: 540:Alastair Hudson 518: 512: 510:Resulting trust 473: 425: 316:Breach of trust 183:Resulting trust 130: 29: 17: 12: 11: 5: 1077: 1067: 1066: 1050: 1049: 1043: 1030: 1003: 997: 984: 978: 965: 946: 943: 941: 940: 928: 919: 907: 895: 880: 871: 859: 847: 835: 823: 811: 799: 787: 775: 763: 748: 736: 724: 712: 703: 691: 676: 664: 652: 640: 638: 635: 601:Main article: 598: 595: 591:Palmer v Carey 567: 564: 514:Main article: 511: 508: 472: 471:Categorisation 469: 465:Toovey v Milne 446:House of Lords 427: 426: 424: 423: 416: 409: 401: 398: 397: 396: 395: 390: 382: 381: 377: 376: 375: 374: 369: 364: 359: 354: 349: 341: 340: 336: 335: 334: 333: 328: 323: 318: 313: 305: 304: 300: 299: 298: 297: 295:Wills Act 1837 292: 287: 282: 277: 272: 267: 262: 257: 252: 247: 242: 237: 229: 228: 224: 223: 222: 221: 216: 211: 206: 198: 197: 193: 192: 191: 190: 185: 180: 172: 167: 162: 157: 152: 144: 143: 142:Types of trust 139: 138: 129: 126: 93:express trusts 72:House of Lords 50: 49: 45:at 56–57, per 35: 34: 15: 9: 6: 4: 3: 2: 1076: 1065: 1062: 1061: 1059: 1052: 1046: 1044:1-84113-412-0 1040: 1036: 1031: 1026: 1021: 1017: 1013: 1009: 1004: 1000: 994: 990: 985: 981: 975: 971: 966: 963:(2): 147–168. 962: 958: 954: 949: 948: 938:, p. 974 937: 936:Hudson (2009) 932: 923: 917:, p. 973 916: 915:Hudson (2009) 911: 905:, p. 108 904: 899: 893: 889: 884: 875: 869:, p. 972 868: 867:Hudson (2009) 863: 857:, p. 971 856: 855:Hudson (2009) 851: 844: 839: 833:, p. 970 832: 831:Hudson (2009) 827: 821:, p. 969 820: 819:Hudson (2009) 815: 809:, p. 968 808: 807:Hudson (2009) 803: 797:, p. 967 796: 795:Hudson (2009) 791: 785:, p. 155 784: 779: 773:, p. 154 772: 767: 761: 757: 752: 746:, p. 967 745: 744:Hudson (2009) 740: 734:, p. 966 733: 732:Hudson (2009) 728: 721: 716: 707: 701:, p. 965 700: 699:Hudson (2009) 695: 689: 685: 680: 674:, p. 963 673: 672:Hudson (2009) 668: 662:, p. vii 661: 656: 650: 645: 641: 634: 632: 627: 623: 619: 614: 610: 604: 594: 592: 588: 584: 583: 578: 573: 566:Express trust 563: 561: 557: 553: 547: 545: 541: 536: 532: 527: 523: 517: 507: 505: 500: 496: 495: 490: 486: 482: 478: 468: 466: 461: 457: 453: 452: 447: 443: 438: 434: 422: 417: 415: 410: 408: 403: 402: 400: 399: 394: 391: 389: 386: 385: 384: 383: 380:International 379: 378: 373: 370: 368: 365: 363: 360: 358: 355: 353: 350: 348: 345: 344: 343: 342: 338: 337: 332: 329: 327: 324: 322: 319: 317: 314: 312: 309: 308: 307: 306: 302: 301: 296: 293: 291: 288: 286: 283: 281: 278: 276: 273: 271: 268: 266: 263: 261: 258: 256: 253: 251: 248: 246: 243: 241: 238: 236: 233: 232: 231: 230: 226: 225: 220: 217: 215: 212: 210: 207: 205: 202: 201: 200: 199: 196:Functionaries 195: 194: 189: 186: 184: 181: 179: 177: 173: 171: 170:Purpose trust 168: 166: 165:Express trust 163: 161: 158: 156: 153: 151: 148: 147: 146: 145: 141: 140: 137: 134: 133: 125: 122: 118: 114: 112: 108: 107: 102: 98: 94: 90: 86: 81: 79: 78: 73: 69: 64: 60: 58: 48: 44: 40: 37: 36: 33: 27: 23: 22: 19: 1051: 1034: 1015: 1011: 988: 969: 960: 956: 945:Bibliography 931: 922: 910: 898: 887: 883: 874: 862: 850: 845:, p. 22 838: 826: 814: 802: 790: 783:Burns (1992) 778: 771:Burns (1992) 766: 755: 751: 739: 727: 722:, p. 95 715: 706: 694: 683: 679: 667: 655: 644: 630: 621: 617: 612: 608: 606: 590: 586: 580: 571: 569: 559: 555: 551: 548: 534: 530: 521: 519: 503: 498: 492: 489:Lord Millett 484: 480: 476: 474: 464: 459: 449: 448:decision in 432: 430: 188:Secret trust 175: 174: 120: 117:Lord Millett 115: 110: 104: 101:Lord Millett 84: 82: 75: 74:decision in 56: 55: 53: 38: 30: 25: 18: 454:, in which 352:Formalities 204:Beneficiary 1018:: 93–115. 637:References 631:Quistclose 622:Quistclose 613:Quistclose 609:Quistclose 587:Quistclose 572:Quistclose 560:Quistclose 556:Twinsectra 552:Quistclose 535:Quistclose 531:Twinsectra 522:Quistclose 504:Quistclose 499:Quistclose 485:Quistclose 481:Quistclose 477:Quistclose 460:Quistclose 433:Quistclose 176:Quistclose 128:Definition 121:Quistclose 111:Quistclose 85:Quistclose 57:Quistclose 26:Quistclose 209:Protector 47:Briggs LJ 1058:Category 303:Remedies 227:Statutes 113:trusts. 103:said in 357:History 347:Cy-près 331:Tracing 321:Damages 219:Trustee 214:Settlor 99:or, as 1041:  995:  976:  926:Ch 207 878:AC 584 620:, the 68:traced 890: 758: 686: 442:trace 339:Other 178:trust 63:trust 61:is a 59:trust 41: 1039:ISBN 993:ISBN 974:ISBN 1020:doi 491:in 1060:: 1014:. 1010:. 961:18 959:. 955:. 431:A 95:, 91:, 54:A 1047:. 1028:. 1022:: 1016:9 1001:. 982:. 420:e 413:t 406:v 24:"

Index

[2015] EWCA Civ 59
Briggs LJ
trust
traced
House of Lords
Barclays Bank Ltd v Quistclose Investments Ltd
resulting trusts
express trusts
constructive trusts
Lord Millett
Twinsectra Ltd v Yardley
Lord Millett
English trust law
Charitable trust
Constructive trust
Discretionary trust
Express trust
Purpose trust
Quistclose trust
Resulting trust
Secret trust
Beneficiary
Protector
Settlor
Trustee
Charitable Uses Act 1601
Charities Act 2006
Law of Property Act 1925
Perpetuities and Accumulations Act 1964
Perpetuities and Accumulations Act 2009

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