Equity and Trusts - Quistclose Trusts

Question 1

What is a Quistclose trust?

Answer 1

Primary and secondary trust:
1- Trust for a specific purpose
2- if the primary trust fails, a secondary resulting trust in favour of the lender

Question 2

What are Quistclose trusts used for?

Answer 2

To protect private contractual interests (Cooper v Powerhouse)

Question 3

Intention: Money should have been lent for sole specified purpose and not for the borrower’s free disposal

Answer 3

Twinsectra v Yardley

Question 4

Intention: Money lent to pay off third party creditors, not for free disposal

Answer 4

Carreras v Freeman Mathews

Question 5

Intention: Money lent for sole purpose of buying equipment

Answer 5

Re EVTR

Question 6

If the money is at the free disposal of the borrower, there is no trust and the lender will be an ordinary unsecured creditor

Answer 6

Re Farepak

Question 7

Payment of the loan into a separate account/ directly to the purpose is strong intention of certainty of intention but not essential

Answer 7

Re EVTR

Question 8

What is Lord Millet’s view on certainty of object for Quistclose trusts, as set out in Twinsectra?

Answer 8

Money remains the property of the lender until applied in accordance of their wishes. If not applied, it must be returned