Twinsectra Ltd v Yardley
| Twinsectra Ltd v Yardley | |
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| Court | House of Lords |
| Decided | 21 March 2002 |
| Citation(s) | [2002] UKHL 12 [2002] 2 WLR 802 [2002] 2 AC 164 [2002] 2 All ER 377 [2002] NPC 47 |
| Transcript(s) | Full text from parliament.uk |
| Court membership | |
| Judge(s) sitting |
Lord Slynn Lord Steyn Lord Hoffmann Lord Hutton Lord Millett |
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Twinsectra Ltd v Yardley [2002] UKHL 12 is a leading case in English trusts law. It provides authoritative rulings in the areas of Quistclose trusts and dishonest assistance.
Twinsectra Ltd sued an entrepreneur, Mr Yardley, and two solicitors, Mr Sims and Mr Paul Leach (of Godalming), for failing to repay a £1m loan. Twinsectra Ltd had given £1m to Mr Sims to pass onto Mr Yardley as a loan for buying real estate near Apperley Bridge, Bradford. Twinsectra Ltd had said it would only give the loan if someone guaranteed Mr Yardley's repayment. Mr Yardley's solicitor, Mr Leach, refused to give the guarantee, but Mr Sims accepted. Mr Sims had owed £1.5m to Mr Yardley from previous dealings. They agreed that if Mr Sims took the loan into his account first, the prior debts would be considered repaid. Mr Sims promised Twinsectra Ltd to not release the money unless the loan conditions were satisfied. The clause read as follows.
However, Mr Sims then gave the money to Mr Yardley’s solicitor anyway, Mr Leach, who passed it onto Mr Yardley. Instead of using the money for the investment, Mr Yardley, in breach of contract used £357,720.11 to pay off some of his debts. Twinsectra Ltd sued Mr Yardley to get the money back and also both solicitors. Mr Sims was now bankrupt. It argued the money was bound by a trust, that Mr Sims was in breach of trust, and Mr Leach dishonestly assisted the breach.
The trial judge found that Mr Leach was not dishonest because he honestly believed that the undertaking did not run with the money. However, he made a contradictory finding that Leach had deliberately shut his eyes. In the Court of Appeal, Potter LJ held that Mr Leach was in fact dishonest, precisely because he had deliberately shut his eyes. A presumption in the transferor’s favour can only be made where there is no evidence that there was an intention to create a trust, or make a gift, or make a loan of the property to the transferee.
The House of Lords all held the loan from Twinsectra Ltd was held on trust by the solicitors. Lord Slynn, Lord Steyn, Lord Hoffmann and Lord Hutton held that the money was held on express trust, created through the terms of the agreement between Twinsectra Ltd and Mr Sims. It then held (controversially, an issue revisited in Barlow Clowes Ltd v Eurotrust Ltd) that Mr Leach had not been dishonest enough for accessory liability. It was necessary for Mr Leach to have realised that he had been acting dishonestly. Lord Millett dissented. He firstly held that the nature of the trust, by which the solicitors held Twinsectra Ltd's loan money was a resulting trust, with a power to apply the money in accordance with the loan contract's terms. He viewed this to be the proper characterisation of this and all Quistclose trusts. He then would have held that Mr Leach was dishonest enough.
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