ABSTRACT
A Quistclose trust comes into existence in relation to a loan contract when the intention of the parties is that the borrower is required to use the loan moneys for a specified purpose. In the event that the borrower goes into insolvency, the loan moneys are deemed to have been held on trust for the lender. The issue is as to the basis on which this trust comes into existence. In Barclays Bank v Quistclose Lord Wilberforce held that a primary trust took effect over the loan moneys until they were used for their assigned purpose, and a secondary trust came into existence so as to carry the equitable interest back to the lender if that primary purpose was not performed. This was interpreted by many commentators as being a resulting trust. Lord Wilberforce himself expressed this as a combination of common law and equitable principles such that an equitable remedy granted property rights to the lender in the event that the terms of the contract were not performed. In Twinsectra v Yardley Lord Millett considered that this was a resulting trust which operated so that sufficient title was transferred to the borrower to carry out the terms of the loan contract but that the lender otherwise retained the equitable interest in the loan moneys.
