Re‐interpreting the Quistclose Trust: A Critique of Chambers' Analysis
Author: Ho, Lusina
Source: Oxford Journal of Legal Studies, Volume 21, Number 2, Summer 2001 , pp. 267-285(19)
Publisher: Oxford University Press
Abstract:Dr Robert Chambers has recently argued that a loan on Quistclose terms does not actually create a trust, but rather the borrower receives the entire beneficial ownership of the funds subject only to a contractual right (enforceable by an injunction) on the part of the lender to prevent the loan being employed other than for the specified purpose. Chambers' approach, or at least something broadly similar, has received some obiter support from Potter LJ in Twinsectra Ltd v. Yardley. This article maintains that Chambers' analysis leaves unresolved a number of significant issues. It does not explain Potter LJ's emphasis on the requirement to segregate the Quistclose funds from the borrower's general assets. Similarly, it seems not applicable outside the typical Quistclose scenario; for instance, where the funds are wrongfully transferred to a third party before the failure of the specified purpose, where the Quistclose arrangement arises outside a contractual setting, and where the dispute involves a third party holding a (pre‐existing) charge. Accordingly, it is suggested that it would be quite premature to conclude that more orthodox explanations of the Quistclose trust should now be jettisoned.
Document Type: Research Article
Affiliations: Faculty of Law, University of Hong Kong
Publication date: Summer 2001
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