Quistclose trusts

The following Property practice note provides comprehensive and up to date legal information covering:

  • Quistclose trusts
  • What is a Quistclose trust?
  • When does a Quistclose trust arise?
  • Using a Quistclose trust

Quistclose trusts

What is a Quistclose trust?

A Quistclose trust is an example of an ‘automatic’ resulting trust, ie a trust which arises where property is transferred by one party to another on terms which leave some or all of the beneficial interest undisposed of.

When does a Quistclose trust arise?

In Barclays Bank v Quistclose Investments, money was loaned to a company by the defendant for the specific purpose of allowing the company to pay a dividend that it had already declared. It was an express condition of the loan that the money should be held in a separate account, to be opened by the company with the claimant bank, until the dividend was paid. After the money had been paid into the account, but before the dividend was paid, the company became insolvent. The bank claimed the money in the account in order to pay off part of the company’s debt to it; the defendant contended that the money was held on a resulting trust for it since the specified purpose for which the company was holding the money could no longer be achieved.

The House of Lords held that the fact that the loan money had been advanced for a specific and exclusive purpose and was to be held in a separate account prior to being used meant that:

  1. the company had a fiduciary duty

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