Quistclose Trust - Lord Milett Judgement

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  • Topic: Trust law, Common law, Fiduciary
  • Pages : 8 (2439 words )
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  • Published : April 6, 2012
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Essay Question:
“My Lords, there are two issues in this appeal. The first is concerned with the nature of the so-called “Quistclose trust” and the requirements for its creation. The second arises only if the first is answered adversely to the appellant. It is whether his conduct renders him liable for having assisted in a breach of trust.”

Lord Millett in Twinsectra Ltd v Yardley and Others [2002] 2 AC 164 at paragraph 52.

Critically analyse Lord Millett’s views on the two issues referred to above indicating the extent to which you agree with him.

Lord Millet recognised two key issues within this case that offers a complete purpose of authority in the area of Quistclose trust and dishonest assistance. The court recognised Mr Paul Leach was a lawyer in Godalming, that was acting as solicitor on behalf the defendant Mr Yardley whom was purchasing a property for which funding was required. Barclays Bank had initially agreed to provide Mr Yardley with the funding he required for purchasing the property through his bank loan application.

However there were delays in the process of obtaining the loan via the bank, therefore as a result of this alternative means of requiring funding where obtained from Twinsectra Ltd. Mr Leach refused to accept the terms and conditions of the loan with Twinsectra as they required him to provide a commitment that he would guarantee the repayment of the loan.

But in fact it was decided later that the loan would be paid to Mr Sims another solicitor associated with Mr Yardley, however Mr Sims was not acting as the solicitor to Mr Yardly in acquiring the purchase of the property. This in fact was the role that fell to Mr Lech, ultimately both Mr Sims and Mr Yardly agreed to the terms of the loan and that Mr Sims would take primary liability of the loan. This was unknown to the parties of Twinsectra and Mr Lech , later on in due course the Barclays Bank loan finally came through, and it was recognised that the Twinsectra loan was no long required. Mr Leach had been made aware of a draft of the proposed undertakings, which also required the money to be applied exclusively for the purchase of the property and for no other purpose. Mr. Sims handed the money over to Mr Leach, who released the funds on Yardley's immediate instructions. Significant monies that had been advanced were diverted to other uses. When Yardley defaulted on the loan and Sims went bankrupt, Twinsectra Ltd resulted in sueing everyone in plain hindsight the primarily target being Mr. Leach on the bases for dishonest assistance in a breach of trust by Mr Sims .

Lord Millet’s View
Lord Millet concluded his speech in the case of Twinsectra Ltd v Yard [2002] by quoting:

“As Sherlock Homes reminded……when you have eliminated the impossible, whatever remains, however improbable, must be the truth. I would reject all the alternative analyses…..and hold the Quistclose trust to be an entirely orthodox example of the kind of default trust known as a resulting trust. The lender pays the money to the borrower by way of loan, but he does not part with the entire beneficial interest in the money and insofar as he does not it is held on resulting trust for the lender from the outset" .

Lord Millet delivered the leading judgement in this case, his judicial analysis closely replicated what he had previously suggested twenty Years ago in an article in the Law Quarterly Review. It is here that Millett made his famous observation on the essence of a trust arrangement being one that a settlor who retains no beneficial interest in the trust he creates is not able to enforce the arrangement. It is also where Millett considers the circumstances where trusts are deemed to have failed on account of being impossible to carry out, or on grounds of falling foul of public policy or even law .

Lord Millet clearly stated that the criteria for a Quistclose Trust to exist must consist of four possible answers the lender, the...
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