Henry Charles Anderson & Anor v Andrew Craige Curtis & Ors

A Quistclose trust arises where money is advanced on terms that it is not at the borrower’s free disposal and must be used for a sufficiently certain purpose. The lender’s beneficial interest is extinguished when the money is properly applied to that purpose, leaving ordinary remedies in debt. A resulting trust continues where the purpose is not achieved or the power to apply the money is misused. A trust over the development or its assets requires realistic evidence that the intended purpose extended beyond applying the money to the development. Repayment and a share of prospective profit do not, without more, establish such an extended purpose, a joint venture, or security over the development.

The claimants lent money to the second defendant for a property development. They alleged that the advance created a Quistclose trust, that the development and assets derived from it were held on trust, and that transfers of residential units gave rise to claims in knowing receipt and dishonest assistance.

The first and second defendants applied under CPR 24.2 for judgment on the basis that the claim had no realistic prospect of success. The claimants applied under CPR 17 to amend their claim against the third and fourth defendants. The central issue was whether there was a realistic prospect of establishing that the trust continued after the loan monies had been used in the development.

1. Disposition. The application under CPR 24.2 succeeded. The claim was dismissed. The application to amend under CPR 17 was also dismissed because the proposed claims were parasitic upon the alleged trust.
2. A Quistclose trust is an orthodox resulting trust. Subject to the borrower’s power to use the money for the specified purpose, beneficial ownership remains with the lender. Proper application of the money extinguishes the lender’s beneficial interest and leaves ordinary remedies in debt. Misapplication, or failure to apply the money for its purpose, leaves the money held on resulting trust for the lender. The court relied on Twinsectra Ltd v Yardley [2002] 2 AC 164, including the explanations at paragraphs 71, 72 and 101.
3. The relevant intention is objective. The question is whether the arrangements had the effect that the money was not at the borrower’s free disposal and was to be used for a particular purpose. The purpose must be sufficiently certain to enable the court to determine whether it was fulfilled. Any uncertainty operates in favour of the lender.
4. For the purpose of the application, it was accepted that the monies had been advanced for the specific purpose of the development, that the purpose was sufficiently clear, and that the money had been used entirely in the development. That use fulfilled the purpose and ended the conceded Quistclose trust.
5. There was no realistic prospect of establishing an additional implied term that the beneficial interest continued until repayment of the loan and payment of profit. The evidence did not support business necessity, an established commercial norm, joint-development status, shared development risk, or a charge over the development. Re EVTR Ltd (1987) 3 BCC 389 (CA) did not extend or modify the governing principles.
6. Since no trust over the development or its assets could realistically be established, the transfers could not constitute breaches of trust and no claim in knowing receipt or dishonest assistance could arise.

Not stated in the judgment.