Quistclose
| Barclays Bank Ltd v Quistclose Investments Ltd | |
|---|---|
 |
|
| Court | House of Lords |
| Decided | 31 October 1968 |
| Citation(s) | [1968] UKHL 4 [1970] AC 567 |
| Case opinions | |
| Lord Wilberforce | |
| Court membership | |
| Judge(s) sitting |
Lord Reid Lord Morris of Borth-Y-Gest Lord Guest Lord Pearce Lord Wilberforce |
| Keywords | |
Barclays Bank Ltd v Quistclose Investments Ltd [1968] UKHL 4 (sub nom Quistclose Investments Ltd v Rolls Razor Ltd) is a leading property, unjust enrichment and trusts case, which invented a new species of proprietary interest in English law. A "Quistclose trust" arises when an asset is given to somebody for a specific purpose and if for whatever reason the purpose for the transfer fails, the transferor may take back the asset.
If a debtor undertakes to use the loan in a particular way, and segregates the creditor's money from his general assets, and if the debtor becomes insolvent, the creditor's money is refundable, and not available to pay the debtor's other creditors. If the trust fails (because the purpose is not, or cannot be, fulfilled), then the sums become subject to a resulting trust in favour of the person who originally advanced the credit, and the person to whom the sums were advanced holds them as trustee.
Rolls Razor Ltd owed £484,000 to Barclays Bank Ltd. It still needed more money to pay a dividend which it had declared to its shareholders on 2 July 1964. Quistclose Investments Ltd agreed to a loan of £209,719 8s 6d on the condition that the dividend would be paid with it, and the money would be put in a separate account (also with Barclays Bank). The money was paid into the account, but before the dividend was distributed, Rolls Razor Ltd went into voluntary liquidation. Quistclose sought to recover the money, contending that its agreement meant Rolls Razor Ltd held the money on trust. Barclays contended that the account was part of the general assets of the company and that they were entitled to exercise a set-off of the money in the account against the debts that Rolls Razor owed with respect of Barclays.
The House of Lords (with the leading judgment being given by Lord Wilberforce) unanimously held that the money was held by Rolls Razor on trust for the payment of the dividends; that purpose having failed, the money was held on trust for Quistclose. The fact that the transaction was a loan did not exclude the implication of a trust. The legal rights (to call for repayment) and equitable rights (to claim title) could co-exist. Barclays, having notice of the trust, could not retain the money as against Quistclose. Similarly, the liquidator of Rolls Razor could not claim title to the money, as the assets did not form part the beneficial estate of Rolls Razor. Lord Reid, Lord Morris of Borth-Y-Gest, Lord Guest and Lord Pearce all agreed with the judgment that Lord Wilberforce gave.
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