(b) protecting the interests of the persons who are the victims of the transaction.‘ ‘(3) (a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him …’ Midl<strong>and</strong> Bank v. Wyatt [1995] 1 FLR 696; [1995] 3 FCR 11 IRC v Hashmi [2002] BCC 943, [2002] 2 BCLC 489 (need not be the sole purpose of the transaction, but rather only one of the purposes) Trowbridge v Trowbridge [2003] 2 FLR 231, [2004] FCR 79, [2003] BPIR 258 (inter-spousal payments = attempt to put money beyond creditors) 56
II. QUISTCLOSE TRUSTS Reading: Hudson, Chapter 22; <strong>and</strong> summary in section 11.3 Further reading: Thomas <strong>and</strong> Hudson, The Law of <strong>Trusts</strong>, (Oxford University Press, 2010), 292-304; <strong>and</strong> 1,542-1,550. Thomas, Powers, (Sweet & Maxwell, 1998), 194-210 Swadling (ed), The Quistclose Trust: Critical Essays (Hart, 2004) Question: what type of trust is a Quistclose trust? 1. The principle in Barclays Bank v. Quistclose: taking security against insolvency Hassall v. Smither (1806) 12 Ves. 119. Re Rogers (1891) 8 Morr 243, 248, per Lindley LJ (must be a resulting trust to prevent trustee from taking benefit from property) **Barclays Bank v. Quistclose [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097: Lord Wilberforce, [1970] AC 567, 581-582: It is not difficult to establish precisely upon what terms the money was advanced … to Rolls Razor Ltd. There is no doubt that the loan was made specifically in order to enable Rolls Razor Ltd. to pay the dividend … <strong>and</strong> for no other purpose. There is surely no difficulty in recognising the coexistence in one transaction of legal <strong>and</strong> equitable rights <strong>and</strong> remedies: when the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose (In re Rogers, 8 Morr. 243, per both Lindley LJ <strong>and</strong> Kay LJ): when the purpose has been carried out (i.e., the debt paid) the lender has his remedy against the borrower in debt: if the primary purpose cannot be carried out, the question arises if a secondary purpose (i.e., repayment to the lender) has been agreed, expressly or by implication: if it has, the remedies of equity may be invoked to give effect to it, if it has not (<strong>and</strong> the money is intended to fall within the general fund of the debtor's assets) then there is the appropriate remedy for recovery of a loan. I can appreciate no reason why the flexible interplay of law <strong>and</strong> equity cannot let in these practical arrangements, <strong>and</strong> other variations if desired: it would be to the discredit of both systems if they could not. In the present case the intention to create a secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out, is clear <strong>and</strong> I can find no reason why the law should not give effect to it. Twinsectra Ltd v. Yardley [1999] Lloyd’s Rep. Bank 438, CofA, per Potter LJ. Templeton Insurance Ltd v Penningtons Solicitors LLP [2006] EWHC 685 (Ch) 2. The Twinsectra model S Worthington, Proprietary Interests in Commercial Transactions, 43-71 **Twinsectra Ltd v. Yardley [2002] 2 All E.R. 377, at 398, House of Lords, per Lord Millett: [81] ‘… the Quistclose trust is a simple, <strong>com</strong>mercial arrangement akin … to a retention of title clause (though with a different object) which enables the borrower to have recourse to the lender’s money for a particular purpose without entrenching on the lender’s property rights more than necessary to enable the purpose to be achieved. The money remains the property of the lender unless <strong>and</strong> until it is applied in accordance with his directions, <strong>and</strong> in so far as it is not so applied it must be returned to him. I am disposed, 57
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