TRUST LAW

TRUST LAW

Introduction

Trust and law are two controversial words that depend on each other; the law need trust to be effective, confidence as well requires the respect of law to function. To understand this fact well, let’s discuss what Quistclose means and how it’s related to law and policy[1]. Quistclose trust leads to high complications in considering justice and policy; it is the only appropriate province of Parliament but not courts. Quistclose trust many times can cause controversies in law and policies and thus can be best suitable in Parliament other than the courts. The motive of this paper is to discuss the question of Quistclose as a providence of Parliament rather than the courts, to what extent is it agreeable or disputable, and how does it affect law and policy.

What is the Quistclose Trust?

A Quistclose trust is a trust formed where a creditor has loaned money to a pledger for a specific purpose. On the occasion that the pledger spends the money for any supplementary purpose, it is apprehended on trust for the lender. Any unsuitably used up money can then be marked out and reimbursed to the lenders^[2].  Courts are guided by the law of jurisprudence and the rule of law; courts strictly follow the constitutional provision for every presented case in a court follows laid down procedures which are in line with the constitution. To discuss this matter of Quistclose further the understanding of some related words to Quistclose trust must be well related, to help in understanding it better.

If the debtor is under liquidation, the dividend that was to be paid is returned to the creditor if the other party has not kept the initial purpose for the usage of money. It, therefore, leads to a lot of complications in terms of giving judgements which are just in the courts. Parliaments are flexible on this matter and thus can reach a consensus easily as compared to the courts.

Policy

Policies are some set guidelines that are meant to bring order, deliberate system of principles to guide decisions and achieve rational outcomes[3]. A policy is a statement of intent and is implemented as a procedure or protocol. Quistclose is an agreement between individuals based on trust in courts. However, this does not apply since the questions about which policies followed or which laid down procedures were observed in the agreement. In a parliament where politics at times supersedes the provisions of policies, where a parliamentarian can make agreements with another, Quistclose can apply in such cases.

The policy of insolvency is one of the factors affecting the Quistclose trust and case of courts. Bankruptcy is an unfair deal that big companies should not be encouraged to use it in any of their transactions. It is unfair to everyone and leads to loss of properties or assets by one company, especially the lending companies. Considering the case of Roll Razor and Quistclose Ltd, Roll Razor went on voluntary liquidation leaving Barclays bank and Quistclose ltd to battle for the ownership of the £210,000. The case is the ruled against the demands of Barclays bank, which seems to be very unfair on their side. The policy of insolvency as used by most of the companies after acquiring a considerable amount of loan they are not able to pay is unfair to the lenders in Quistclose trust case.

Justice

Justice is defined as allocation or attainment of what is perceived just and rightful. Justice is the result of a successful lawsuit where everyone is satisfied the right thing according to the provisions of the law is done. Most of the occasion parliaments do not accord justice as for the provision of the constitution. Their decisions may be based on consensus, where the majority takes the day, and the minority will have to follow the majority rule but have their say[4]. Such a scenario applies well to what Quistclose entails, an agreement based on consensus. In the case of court, justice is simply the pursuit of truth according to the constitution, and according to everyone, what is rightfully theirs. Quistclose, therefore, does not fit in the case of justice based on courts.

Quistclose trust has a different way of giving or administering justice, at a time, though who is expected to win a case are the ones being defeated. In the case of Roll Razor and Quistclose Ltd and Barclays bank, the case is decided against Barclays bank who is owed by Roll Razor and it practically right they should be paid. However, the court rules that the money be reversed back to the initial lender who made the agreement based on trust that the money was being used to pay a dividend. Barclays was not involved in the initial deal, and thus the case goes against them based on the initial agreement made on trust. Practically it noted that justice is not served to those who deserved it, but rather justice is served to those in the initial deal based on trust.

Consequently, such a decision may only lead to more courts appeal since all the parties are not satisfied. It can also lead to bad blood between the individuals involved in this fiasco. Justice which is not rightfully served, can lead to loss of trust and commitment between parties or partners in business. Quistclose trust thus can lead to more distrust than trust if one company decides to go on voluntary liquidation. They are therefore making Quistclose a subject of Parliament other than the courts, simply because parliaments operate majorly on trust and agreements of the majority which can be unjust to the minority group of the Parliament. Courts, on the other hand, operates squarely on the rule of law and jurisprudence.

Doctrine

Doctrines are set principles and guidelines that a religious depend on in dispensing their faith. Beliefs differ from one religion to another or one faith to another. There various religions and denominations under these religions. For instance, Christian, especially the Catholics, believe in the heart of giving and forgiveness[5]. Quistclose trusty is always common in religious affairs, where trust is the guiding principle in everything they do. Faith is also a factor that is considered in Christian life; actually, Christianity is based on faith. Quistclose trust thrives well where generosity, faith, and trust is the order of the day.

Parliamentarians may be persuaded by their religious alignments to agree to a particular decision based on trust and consensus[6]. On the other hand, courts are legal entities where every decision reached must follow the provisions of the constitution and the available laws. Courts do not follow doctrine either do they consider doctrinal arguments unless they have legal links; therefore, Quistclose trust is a controversial issue as far as courts are concerned.

After consideration of the above elements that are policy, justice, and doctrine regarding Quistclose and how Parliament and court are affected by it, an examination of various court cases will help in understanding it better. A consideration of various court cases that were based on Quistclose will make us understand better how it affects courts more than it affects the Parliament[7]. The decision of the court is more affected by Quistclose than it affects the Parliament since some decisions of the Parliament are basically through agreements which may or may not be legal. Such decisions can be based on trust and deal of individuals, a case which is contrary to the provisions of the court. Let us consider the case of Barclay’s ban v. Quistclose investment to understand this narrative better.

The case of Barclays bank ltd vs Quistclose investment is well applied in some of the religious doctrines, for instance, the doctrine of payment of debts, some beliefs discourages demanding for debts from debtors but rather advocates for forgiveness or complete withdrawal from claiming the debts. Thus Quistclose investment or will suffer the loss if they would both or individually agree to surrender the claims of their obligations. Roll Razor, on the other hand, would benefit from the doctrine of forgiveness. Forgiveness is not part of constitutional law, everyone deserves just, and that’s what the courts are based on; therefore, the doctrine of forgiveness will bring a lot of complication in the allocation of justice.

Barclays bank ltd vs Quistclose investment

The lawsuit between Barclays Bank and Quistclose investment gives a good explanation of what Quistclose trust works against law or courts[8].  The case between bank r which on mutual agreement with a lending company, agreed on a loan which the banks were going to use for payment of dividend. The bank, however, did not honour their mutual agreement which was based on trust and instead used the money borrowed on a different course. The judges in their judgement, unanimously held that Rolls Razor held the money on trust for the payment of the dividends; that purpose having failed, the money was held on trust for Quistclose. The fact that the transaction was a loan did not exclude the implication of a trust. The legal rights to call for repayment and equitable rights to claim title could co-exist. Barclays, having notice of the trust, could not retain the money as against Quistclose.

The implications of Quistclose trust in the court’s proceedings is much significant, and the judgment is always made on the side of the law, what does the law demand and what is the right position of the law[9]. In the judgement made by the judges, it indicates that the decisions made in the court of law are purely legal, and it’s not based on any other factor. However, the courts considered the initial agreement Rolls Razor made to use the money acquired to pay a dividend. Since that did not happen based on the trust, the money was refunded back to the initial lender. Cases such as this, are best solved outside the courts where individuals agree on mutual grounds based on trust; thus Parliament are more suitable for such other than the courts

Implications of Quistclose trust and Trust

The difference between Quistclose trust and other trust is that there is an existence of a specific motive to which the money on credit must be applied to. The failure to which brings about the issue of trust[10]. The money will, however, be reversed back to the initial lender if that specific motive is not met accordingly. Quistclose operates on varied situations such as the money loaned for a specific purpose, for instance, payment of dividend as of the above case remains as initially agreed. The issues that have not been well grasped by the judicial considerations on Quistclose trust is how it has shallowly been defined. Consequently raising suggestions that the general law is applied in relations to powers.

The issues of Quistclose trusts include uncertainty also known as “Well, for one, the vagueness”. It means that people are uncertain about the outcome, and people will only risk it if there’s a LOT of money involved. Despite how wide it is, which could allow for abuse by the institutions if they wanted to. It doesn’t make sense, because for smaller amounts the litigation effort would outweigh what they could get for it – and if they lost, they’d just be unsecured creditors, again[11]. The uncertainty makes the individual cases way too wasteful. Because they don’t know how it will come out, it ties up the courts and also the other unsecured creditors – because it ties up the larger pot. So stagnation, and if the banks do lose, then they’re worse off than if they’d just been unsecured creditors. Also, it undercuts the prize, because the costs of litigation offset it.

Considering the case between Cooper v PRG Powerhouse Ltd, the claimants applied for a pronouncement that the amount of £34,239 was held on trust for him to pay the money to the car supplier. In connection with the completion of the applicant’s purchase of the car, and if that purpose failed for any reason, repayment to him[12]. The liquidator gives in to that the applicant’s claim should be considered like any other indiscreet claim against the company, and that the proof before the court was unsatisfactory to justify a finding of a purpose trust. The proof pointed to an arrangement whereby the money comprising the payment was to be at the free disposal of the company, subject only to a contractual obligation to make the payment to the supplier

The issues of trust is a very controversial issue since it is always undocumented, and thus no proof trust can be claimed in a court of law. Trust is majorly based on the goodwill of the parties, and no evidence can be provided of trust[13]. The above case between Cooper and PRG powerhouse, there was a claim of insufficient evidence based on trust. In most occasion, individuals in a Quistclose may fail to honour their agreement and claims lack of evidence and the inconsistency of the deal or agreement thus complicating court proceedings. Trust is never assured 100% and can change any time depending who the custodian is, an agreement based on trust is always likely to meet a dead end.

Quistclose Trust Who Can Implement It

            Implementation of Quistclose trust is a very controversial issue; it’s challenging to reach a consensus on the matter of Quistclose trust, especially in a court of law. For example, taking the cases of Barclays Bank Ltd v. Quistclose investments Ltd of 1970. the law established that when a creditor lends money to another company B for the precise motive of paying C., the creditor can, therefore, claim back the money from the debtor B if the company is going in liquidation[14]. The reason was that a trusting rapport could co-exist with the loan. Subsequently, it has been a matter of postulation as to the nature of the trust relationship

The result of the judgement by the judges on the case of Barclays Bank v. Quistclose investment raised a lot of questions on how justice was served, and who can implement such decisions relating to Quistclose trust. Parliaments are best in solving such issues relating to trust since most of their decisions are based on consensus and trust. Courts, however, depends on the rule of law and the provisions of the constitution and thus in solving or implementing Quistclose trust becomes a very controversial issue and raise a lot of questions. The possible solution: let Parliament deal with it[15]. They are not beholden to previous decisions of the court, can set the goalposts clearly to prevent abuse, but make it certain enough that when ‘necessary, people can use it effectively. However, must consider all the issues of Parliament, and why they are not usually the best to deal with matters of justice and, at times, policy.

In conclusion, the question of when a Quistclose trust can be recognised in a given set of facts gives rise highly complex considerations of policy and justice. Which are the appropriate providence of Parliament rather than the court, in agreement to this statement, the above-discussed issues supports it further[16]. Courts are governed by the rule of law and always strives to attain justice based on the law of jurisprudence. Parliaments, on the other hand, are governed by set policies which can be agreed upon through consensus and trust. Therefore Quistclose can be considered based on some facts which may complicate the issues of justice and policies.

Bibliography

TANG, H. W. (2016). Equity and trusts, [2015]. https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=4315&context=sol_research

Bulan, R. (2019). Implied Trusts and Illegality. Journal of Malaysian and Comparative Law, 21, 117-156. http://mjs.um.edu.my/index.php/JMCL/article/view/16092

McCormack, G. (1994). Conditional Payments and Insolvency-The Quistclose Trust. Denning LJ, 9, 93. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/denlj9&section=9

Hudson, E. (2017). A Normative Approach to the Quistclose Trust. The Modern Law Review, 80(5), 775-811. https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-2230.12288?casa_token=mv-fhPfx77AAAAAA:snLuD0afN2oAQGxpXRI1Ae8pIrwuEwI_xlLxUrYXUc6hMVDiXPj5bbdVUwL3mShsvZHbsjK5EWuBxv2m

Low, K. F. (2018). Non-Charitable Purpose Trusts: The Missing Right to Forego Enforcement. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3502628

En, N. K. J. (2017). Once More unto the Breach: The Quistclose Trust Revisited. Oxford U. Undergraduate LJ, 56. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/oxfuniv6&section=9

Hudson, E. (2017). A Normative Approach to the Quistclose Trust. The Modern Law Review, 80(5), 775-811. https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-2230.12288?casa_token=EKi9mZXjabMAAAAA:9BFASUpZsYo0Rct1w4nqifOX9dEe4quJtuawMMubBEV9_Sp4-_mjg1s3ky8Hy54dXPZ7ALA5CuBPNDab

Smolyansky, M. (2010). Reining in the Quistclose Trust: a Response to Twinsectra v Yardley. Trusts & Trustees, 16(7), 558-568. https://academic.oup.com/tandt/article-abstract/16/7/558/1634006

[1] TANG, H. W. (2016). Equity and trusts, [2015]. https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=4315&context=sol_research

[2] Bulan, R. (2019). Implied Trusts and Illegality. Journal of Malaysian and Comparative Law, 21, 117-156. http://mjs.um.edu.my/index.php/JMCL/article/view/16092

[3]. TANG, H. W. (2016). Equity and trusts, [2015]. https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=4315&context=sol_research

[4] Bulan, R. (2019). Implied Trusts and Illegality. Journal of Malaysian and Comparative Law, 21, 117-156. http://mjs.um.edu.my/index.php/JMCL/article/view/16092

[5] TANG, H. W. (2016). Equity and trusts, [2015]. https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=4315&context=sol_research

[6]. Low, K. F. (2018). Non-Charitable Purpose Trusts: The Missing Right to Forego Enforcement. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3502628

[7] Low, K. F. (2018). Non-Charitable Purpose Trusts: The Missing Right to Forego Enforcement. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3502628

[8]. McCormack, G. (1994). Conditional Payments and Insolvency-The Quistclose Trust. Denning LJ, 9, 93. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/denlj9&section=9

[9] Hudson, E. (2017). A Normative Approach to the Quistclose Trust. The Modern Law Review, 80(5), 775-811. https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-2230.12288?casa_token=mv-fhPfx77AAAAAA:snLuD0afN2oAQGxpXRI1Ae8pIrwuEwI_xlLxUrYXUc6hMVDiXPj5bbdVUwL3mShsvZHbsjK5EWuBxv2m

[10] En, N. K. J. (2017). Once More unto the Breach: The Quistclose Trust Revisited. Oxford U. Undergraduate LJ, 56. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/oxfuniv6&section=9

[11] Smolyansky, M. (2010). Reining in the Quistclose Trust: a Response to Twinsectra v Yardley. Trusts & Trustees, 16(7), 558-568. https://academic.oup.com/tandt/article-abstract/16/7/558/1634006

[12] Hudson, E. (2017). A Normative Approach to the Quistclose Trust. The Modern Law Review, 80(5), 775-811. https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-2230.12288?casa_token=EKi9mZXjabMAAAAA:9BFASUpZsYo0Rct1w4nqifOX9dEe4quJtuawMMubBEV9_Sp4-_mjg1s3ky8Hy54dXPZ7ALA5CuBPNDab

[13] En, N. K. J. (2017). Once More unto the Breach: The Quistclose Trust Revisited. Oxford U. Undergraduate LJ, 56. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/oxfuniv6&section=9

[14] En, N. K. J. (2017). Once More unto the Breach: The Quistclose Trust Revisited. Oxford U. Undergraduate LJ, 56. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/oxfuniv6&section=9

[15] McCormack, G. (1994). Conditional Payments and Insolvency-The Quistclose Trust. Denning LJ, 9, 93. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/denlj9&section=9

[16] Hudson, E. (2017) A Normative Approach to the Quistclose Trust. The Modern Law Review, 80(5), 775-811. https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-2230.12288?casa_token=EKi9mZXjabMAAAAA:9BFASUpZsYo0Rct1w4nqifOX9dEe4quJtuawMMubBEV9_Sp4-_mjg1s3ky8Hy54dXPZ7ALA5CuBPNDab