Barclays Bank Ltd v Quistclose Investments Ltd

Barclays Bank Ltd V Quistclose Investments Ltd

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Barclays Bank Ltd v Quistclose Investments Ltd

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Barclays Bank Ltd v Quistclose Investments Ltd AC 567 (sub nom Quistclose Investments v Rolls Razor) is a leading property, unjust enrichment and trusts case, which invented a new species of proprietary interest. What is now known as a "Quistclose trust" means that when an asset is given to somebody for a specific purpose and for whatever reason the purpose for the transfer fails, the transferor may take back the asset.

Suppose a debtor undertakes to use the loan in a particular way, and segregates the creditor's money from his general assets. Consequently, if the debtor becomes insolvent, the creditor's money is refundable, and not available to pay the debtor's other creditors, i.e. 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.

Facts

Rolls Razor was deeply indebted to Barclays. It needed further additional sums to be able to pay a dividend which it had declared. Rolls Razor borrowed funds from Quistclose in order to satisfy the dividend declared. The terms of the loan were such that the funds would only be used for the sole purpose of paying the dividend. The loan was paid into an account with Barclays, and Barclays was given notice of the arrangement.

However, between the time that the loan was advanced and the dividend being paid, Rolls Razor went into......
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