quistclose trust

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A trust that arises when property has been transferred for a specified purpose but that purpose then fails. The name is derived from Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (HL). Such a trust has the effect of “ringfencing” the property concerned (usually money) and protecting it from the claims of third parties (usually creditors). The exact nature and classification of the quistclose trust has remained elusive. Theories range from it being a form of resulting trust (Twinsectra v Yardley [2002] 2 AC 164 (HL) (Lord Millett), an entity consisting of a primary and a secondary trust (Barclays Bank v Quistclose Investments (Lord Wilberforce), or a contractual arrangement that limits the use that the recipient may make of the money, such that a resulting trust arises in favour of the donor or lender when the purpose for which the money was advanced fails.

Subjects: Law.

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