The Enigma of the Quistclose Trust

Brandon Dominic Chan


The Quistclose trust is an invaluable commercial device for lenders in view of its unique quasi-security element. It is the product of equity's flexibility in navigating the strict rigours of the common law. Unfortunately, since its inception and recent resurgence
in Twinsectra v Yardley, it has been an eternally baffling subject. This mystery is largely caused by the unconventional principles upon which the Quistclose trust is founded and its strategic straddle between the realm of trusts and insolvency law. However, its increasing importance in commercial contracts and international finance transactions such as securitisations sparks renewed interest in the subject. Analysing the doctrinal difficulties which confounds both equity scholars and legal practitioners alike, this paper argues that this trust device is too useful in commercial practice to be abandoned and ultimately lends support to the restitution-inspired arguments of Lord Millett in rationalising the juridical conundrums that afflict the trust.

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