Twinsectra Ltd v Yardley
A Quistclose trust is a resulting trust under which the lender keeps the beneficial interest, and dishonest assistance requires conduct that is dishonest by ordinary standards.
Facts
Twinsectra lent £1 million to Mr Yardley for the purpose of buying property. The money was paid to Mr Sims, Mr Yardley's solicitor, who gave an undertaking that it would be used solely for the purchase of property and for no other purpose. In breach of the undertaking, Mr Sims passed the money to another solicitor, Mr Leach, who paid it out on Mr Yardley's instructions, partly for other purposes. Twinsectra sued Mr Leach for dishonest assistance in a breach of trust.
Legal principle
The House of Lords held that the money was held on a Quistclose trust. Lord Millett said that a Quistclose trust is a resulting trust, under which the money remains in the lender's beneficial ownership, subject to a power for the borrower to use it for the stated purpose. If the purpose cannot be carried out, the money is held on resulting trust for the lender. However, the House held, by a majority, that Mr Leach was not liable for dishonest assistance, because, applying a combined test of dishonesty, he had not realised that his conduct was dishonest by ordinary standards. Lord Hutton said that the defendant must have realised that by the ordinary standards of reasonable and honest people his conduct was dishonest. Lord Millett dissented on that point, preferring an objective test. The test of dishonesty was later clarified in Barlow Clowes v Eurotrust and Ivey v Genting Casinos.
Related cases on tracing and third party liability
- Agip (Africa) Ltd v Jackson [1991] Ch 547
- Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509
- Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 WLR 1476
- Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22
- BCCI (Overseas) Ltd v Akindele [2001] Ch 437
- Bishopsgate Investment Management Ltd v Homan [1995] Ch 211
- Devaynes v Noble (Clayton's Case) (1816) 1 Mer 572
- El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
