The Quistclose trust, which may be created to a loan for a specific purpose, has been confused with a purposive trust. Therefore, the trust which is brought into existence is an express private trust in favour of beneficiaries. The trust is subject to certain conditions or purposes.
Are Quistclose trusts resulting trusts?
This note explains that a Quistclose trust is a form of resulting trust that may arise when funds are transferred for specific and exclusive purposes, as explained in Twinsectra Ltd v Yardley and others [2002] UKHL 12.
What type of trust 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.
What is an automatic resulting trust?
Automatic resulting trust An automatic resulting trust will arise where the settlor transfers property to the intended trustee but the trust has failed for some reason. The trustee holds the legal title of the property on trust. The beneficial or equitable ownership is retained by the settlor.
Do purpose trusts have beneficiaries?
Unlike traditional trusts, Purpose Trusts do not have beneficiaries. Instead they are established for specified non-charitable purposes (“purposes”).
What is constructive trust in law?
A constructive trust is not an actual trust by the traditional definition. It is a legal fiction that is used as a remedy for unjust enrichment. Hence, there is no trustee, but the constructive trust orders the person who would otherwise be unjustly enriched to transfer the property to the intended party.
Are Quistclose trusts best understood as trusts for persons or for purposes?
However, Quistclose trusts are valid as purpose trusts because there is no ascertainable beneficiary who can enforce the trust at the time of the transfer.
What is the purpose of resulting trust?
A resulting trust is an implied trust that comes into existence by operation of law, where property is transferred to someone who pays nothing for it; and then is implied to have held the property for benefit of another person. The trust property is said to “result” or jump back to the transferor (implied settlor).
How do you prove a resulting trust?
A resulting trust is only presumed and as such can be rebutted in the event that evidence can be provided to prove that the intentions of the parties were to gift the money. Examples include: Evidence the money was a gift such as a gifted deposit letter.
What is a secret trust in a will?
A secret trust arises when a testator makes a gift in a will to a donee, intending that the donee should receive the gift as trustee for an ultimate beneficiary or beneficiaries, under an express or implied agreement between the testator and the donee, made outside the will.
What is the purpose of a Quistclose trust?
A Quistclose trust is a trust created where a creditor has lent money to a debtor for a particular purpose. In the event that the debtor uses the money for any other purpose, it is held on trust for the creditor. Any inappropriately spent money can then be traced, and returned to the creditors.
Why was 9The loan paid to Quistclose trust?
InRe Northern Developments Holdings Ltd,9the loan money was paid for ‘the express purpose of providing money for the subsidiary’s unsecured creditors over the ensuing weeks and for no other purpose’ and consequently aQuistclosetrust was upheld.
How is unconscionableness met in a Quistclose trust?
In Quistclose 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.
What did Lord Wilberforce say about the Quistclose trust?
In the Quistclose, 6 case a lender advanced money by way of loan to a public company on terms that the borrower would apply the money exclusively for the purpose of paying a dividend which it had declared but which it could not afford to pay. 7 ‘A necessary consequence from this’, Lord Wilberforce said
