Barclays Bank Ltd v Quistclose Investments Ltd

English Equity & Trusts

Barclays Bank Ltd v Quistclose Investments Ltd
Image: ‘Bankers in Action’ by Remedios Varo

Conditional lending, while perhaps overlooked during commercial and personal loans, forms the bedrock of such delicate transactions, and so should the borrower find themselves unable to apply the funds as expected, the nature of the agreement remains lawfully intact in favour of the lender. In this matter, an insolvent debtor’s bank attempted to convert such monies into company assets at the expense of the lender, at which point the reassurance of equity intervened.

In 1964, the shareholders of a relatively successful enterprise took steps to issue dividends of around £210,000, however upon inspection, they discovered that without adequate liquidity, the payment would be impossible. With that in mind, the company owner secured a conditional loan from the respondents, on the express condition that the funds were to be used for dividend issue only.

Once received, the owner wrote to the company bank, giving instruction to open a standalone account for the retention of the funds, while stipulating that:

“We would like to confirm the agreement reached with you this morning that this amount will only be used to meet the dividend due on July 24, 1964.”

Unfortunately, on July 17 1964, the company entered into voluntary liquidation, whereupon the monies held remained unused, as per the instructions given at the point of receipt. Some time later, the respondents demanded repayment of the money loaned, after which the appellant bank argued that it had since become a corporate asset, and was therefore subject to the priorities of all associated creditors involved in the bankruptcy process.

At the point of litigation, the respondents held that the money loaned was subject to a resulting trust, and that the bank by virtue of their position, were now under a fiduciary liability as constructive trustees for the amount loaned. In the first hearing, the judge awarded in favour of the appellants, on grounds that equitable principles did not apply when arms-length dealings fail, whereupon the respondents appealed and the Court held that in matters involving third parties to a failed transaction, recovery under equity was a principle long enjoyed, and routinely evidenced through a number of judgments across hundreds of years.

Presented again to the House of Lords, the House examined the complexity of the transaction, and noted that in Toovey v Milne, Abbot CJ had ruled that failure to apply the money loaned in the way originally intended, allowed for recovery of the funds during insolvency, under the principle that:

“[T]his money was advanced for a special purpose, and that being so clothed with a specific trust, no property in it passed to the assignee of the bankrupt. Then the purpose having failed, there is an implied stipulation that the money shall be repaid.”

Here again, reference was made to the express conditions applied to the loan, as well as the statement made in the letter at the time the money was passed to the appellant bank. It was further noted that while in circumstances where the lender agrees to loan on non-specific terms, there is an implied assumption that such funds become part of the corporate estate (albeit not entirely free of equity), however on this occasion there was ample testimony that the respondents had bargained with the borrowers on clear conditions, therefore the House uniformly and unreservedly held that the Appeal Court decision was to remain untouched and the bank’s appeal dismissed.

Key Citations

“[W]hen the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose…”

Strong v Bird

English Equity & Trusts

Strong v Bird
Image: ‘Debtor Night’ by Seminary Road

While English common law requires the perfecting of a gift through written documentation, the circumstances of that prerequisite can be somewhat altered when the moment calls. On this occasion, a testatrix was ultimately able to complete an oral debt release through the appointment of her debtor as an executor.

In 1866, the deceased was cohabiting with her son in-law when due to her sizeable wealth, she entered into an agreement whereby a significant amount of rent was paid on a quarterly basis, after which the defendant borrowed £1100, on the proviso that she deducted £100 per quarter until the balance owed was clear.

After only two payments, the deceased relinquished the debt, and explained that no further deductions were necessary. This evidence was supported both by his wife and from handwritten notes left on the cheque counterfoils used before her demise.

Upon her passing, the beneficiary to her will contested that the £900 unpaid, was now owed under law, as the cessation of the loan had not been committed to any form of written notice aside from the cheque stubs, which were deemed insubstantial as proof.

Relying upon the essence of equity, the court examined the context in which her wishes had been executed, and knowing the oral and notary testimony were insufficient to stand as perfect, her appointment of the defendant as executor to her will, was evidence enough, and that while:

“The law requires nothing more than this, that in a case where the thing which is the subject of donation is transferable or releasable at law, the legal transfer or release shall take place. The gift is not perfect until what has been generally called a change of the property at law has taken place.”

Thus the court held that the deceased, having made no express acknowledgement of a debt within her will, was proof enough that the gift was perfect, and that its absence created in the defendant, an absolute right to title of the £900, therefore no challenge could be made, equitably or otherwise. The court further noted that her further payments of full rent for a period of four years after the money had been loaned, showed again that she considered the sum paid in full, and so sought no recovery in death, as she might in life.

Key Citations

“[T]he mere saying by a creditor to a debtor, “I forgive you the debt,” will not operate as a release at law. It is what the law calls nudum pactum, a promise made without an actual consideration passing, and which consequently cannot be supported as a contract.

Bray v Ford

English Equity & Trusts

Bray v Ford
Image: ‘Advocate’ by Honore Daumier

Profiting from a fiduciary position, while not expressly forbidden, is a feature that requires careful consideration by both trustees and beneficiaries, and so in this matter the billing of fees for legal services proved both offensive and damaging for the party accused.

In 1895, the Governor of the Yorkshire College took issue with the vice-chairman after discovering that he had for a period of fourteen years, been providing legal function as a solicitor whilst holding a position based upon a voluntary footing. Incensed at this opportunistic behaviour, the now appellant wrote a lengthy letter to the respondent, accusing him of breaching his fiduciary duty to the institution her served, while stressing that he had:

“[U]sed religious, educational and philanthropic schemes as a hypocritical cover for the purpose of serving his own ends.”

The respondent argued that the terms of the memorandum of association had provided him with rights to both charge and profit from his work, a contention that remained largely unproven at the point of litigation. In the first hearing, the judge underemphasised the importance of the accusation levelled, instead focussing on the libellous tone used in the letter, which at the time, was circulated amongst three hundred other college governors.

Having convinced the jury that the respondent was justified in his collection of payment for legal services, the judge again placed greater weight upon the damaging effects of the written statements, after which the jury returned a verdict in favour of the respondent, and with damages set at a lofty 600l. Upon appeal, the appellant was left facing a similar outcome after the Court agreed that the libel charges remained as effective as they would have should the respondent been proved wrong, thus prompting a final plea before the House of Lords.

Here, the roots of the matter were revisited, along with Order XXXIX r.6 of the Rules of the Supreme Court 1883, which explained how:

“[A] new trial shall not be granted on the ground of misdirection or of the improper admission or rejection of evidence,…unless in the opinion of the Court to which the application is made some substantial wrong or miscarriage has been thereby occasioned in the trial…”

It was thus uniformly agreed by the House that from the outset, the nature of the action had been grossly overlooked in favour of aspersions, and that the trial judge had clearly failed to acknowledge the gravity of a fiduciary breach, which if proven correct, went some way to justifying the claims made by the appellant at the start. It was for this reason that the House held that there had been a clear miscarriage of justice, and that in failing to recognise this, the Court of Appeal had conversely erred in judgment.

In light of these collective mishaps, the House duly reversed the Court of Appeal’s decision, directed a re-trial under the Supreme Court Rules, and ordered repayment of all courts costs and damages to the appellant.

Key Citations

“Every party to a trial by jury has a legal and constitutional right to have the case which he has made, either in pursuit or in defence, fairly submitted to the consideration of that tribunal.”

“It is an inflexible rule of a Court of Equity that a person in a fiduciary position, such as the respondent’s, is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict.”

“[I]n the case of an action for libel, not only have the parties a right to trial by jury, but the assessment of damages is peculiarly within the province of that tribunal. The damages cannot be measured by any standard known to the law; they must be determined by a consideration of all the circumstances of the case, viewed in the light of the law applicable to them.”

Royal Brunei Airlines v Tan

English Equity & Trusts

Royal Brunei Airlines v Tan
Image: ‘Singapore Airlines A380’ by Nop Briex

To read about this case in greater depth, and with the benefit of full OSCOLA referencing, simply purchase a copy of ‘The Case Law Compendium: English & European Law’ from leading booksellers around the world.

Where can I buy it?

The book is available now through most Amazon sites thanks to the brilliance of Print on Demand (POD) technology and it is also printed through Ingram Spark (aka Lightning Source), who, through their worldwide  partnership agreements, supply ‘The Case Law Compendium’ to almost 40,000 retailers, libraries, schools and universities while providing worldwide shipping as standard.

America

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Australia & New Zealand

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I cannot emphasise enough just how invaluable this book will become to you as your law course progresses, and you’ll be surprised at just how fast you learn the cases and how your confidence grows when discussing their finer points. I am supremely confident that you will also find yourself returning to the book when studying both for insight and refreshment of knowledge, and I quietly hope you will be equally excited whenever you turn to this unprecedented resource.

Please remember that it was you the worldwide readers, that inspired this book, so you owe it to yourselves to buy it (and use the hell out of it) and to tell your peers and friends everywhere, so that they too can work towards becoming an ‘A‘ student in English law.

– Remember that with ‘The Case Law Compendium’ you can do it.

Electronic Signatures Neil

Re Recher’s Will Trusts

English Equity & Trusts

Re Recher's Will Trusts
Image: ‘Reading the Will’ by David Wilkie

To read about this case in greater depth, and with the benefit of full OSCOLA referencing, simply purchase a copy of ‘The Case Law Compendium: English & European Law’ from leading booksellers around the world.

Where can I buy it?

The book is available now through most Amazon sites thanks to the brilliance of Print on Demand (POD) technology and it is also printed through Ingram Spark (aka Lightning Source), who, through their worldwide  partnership agreements, supply ‘The Case Law Compendium’ to almost 40,000 retailers, libraries, schools and universities while providing worldwide shipping as standard.

America

Amazon.com, Barnes & Noble

Australia & New Zealand

Booktopia

Britain

 Amazon,   BlackwellWaterstones

Canada

AmazonChapters Indigo

France

Amazon

Germany

Amazon

India

Amazon

Italy

Amazon

Japan

Amazon

Latin America

Amazon Brazil

Amazon Mexico

Spain

Amazon

I cannot emphasise enough just how invaluable this book will become to you as your law course progresses, and you’ll be surprised at just how fast you learn the cases and how your confidence grows when discussing their finer points. I am supremely confident that you will also find yourself returning to the book when studying both for insight and refreshment of knowledge, and I quietly hope you will be equally excited whenever you turn to this unprecedented resource.

Please remember that it was you the worldwide readers, that inspired this book, so you owe it to yourselves to buy it (and use the hell out of it) and to tell your peers and friends everywhere, so that they too can work towards becoming an ‘A‘ student in English law.

– Remember that with ‘The Case Law Compendium’ you can do it.

Electronic Signatures Neil

Re Montagu

English Equity & Trusts

Re Montagu
Image: ‘Edward Montagu’ by Sir Peter Lely

To read about this case in greater depth, and with the benefit of full OSCOLA referencing, simply purchase a copy of ‘The Case Law Compendium: English & European Law’ from leading booksellers around the world.

Where can I buy it?

The book is available now through most Amazon sites thanks to the brilliance of Print on Demand (POD) technology and it is also printed through Ingram Spark (aka Lightning Source), who, through their worldwide  partnership agreements, supply ‘The Case Law Compendium’ to almost 40,000 retailers, libraries, schools and universities while providing worldwide shipping as standard.

America

Amazon.com, Barnes & Noble

Australia & New Zealand

Booktopia

Britain

 Amazon,   BlackwellWaterstones

Canada

AmazonChapters Indigo

France

Amazon

Germany

Amazon

India

Amazon

Italy

Amazon

Japan

Amazon

Latin America

Amazon Brazil

Amazon Mexico

Spain

Amazon

I cannot emphasise enough just how invaluable this book will become to you as your law course progresses, and you’ll be surprised at just how fast you learn the cases and how your confidence grows when discussing their finer points. I am supremely confident that you will also find yourself returning to the book when studying both for insight and refreshment of knowledge, and I quietly hope you will be equally excited whenever you turn to this unprecedented resource.

Please remember that it was you the worldwide readers, that inspired this book, so you owe it to yourselves to buy it (and use the hell out of it) and to tell your peers and friends everywhere, so that they too can work towards becoming an ‘A‘ student in English law.

– Remember that with ‘The Case Law Compendium’ you can do it.

Electronic Signatures Neil

Re Hallett’s Estate

English Equity & Trusts

Re Hallett's Estate
Image: ‘Lawyer Books’ by Mike Savad

To read about this case in greater depth, and with the benefit of full OSCOLA referencing, simply purchase a copy of ‘The Case Law Compendium: English & European Law’ from leading booksellers around the world.

Where can I buy it?

The book is available now through most Amazon sites thanks to the brilliance of Print on Demand (POD) technology and it is also printed through Ingram Spark (aka Lightning Source), who, through their worldwide  partnership agreements, supply ‘The Case Law Compendium’ to almost 40,000 retailers, libraries, schools and universities while providing worldwide shipping as standard.

America

Amazon.com, Barnes & Noble

Australia & New Zealand

Booktopia

Britain

 Amazon,   BlackwellWaterstones

Canada

AmazonChapters Indigo

France

Amazon

Germany

Amazon

India

Amazon

Italy

Amazon

Japan

Amazon

Latin America

Amazon Brazil

Amazon Mexico

Spain

Amazon

I cannot emphasise enough just how invaluable this book will become to you as your law course progresses, and you’ll be surprised at just how fast you learn the cases and how your confidence grows when discussing their finer points. I am supremely confident that you will also find yourself returning to the book when studying both for insight and refreshment of knowledge, and I quietly hope you will be equally excited whenever you turn to this unprecedented resource.

Please remember that it was you the worldwide readers, that inspired this book, so you owe it to yourselves to buy it (and use the hell out of it) and to tell your peers and friends everywhere, so that they too can work towards becoming an ‘A‘ student in English law.

– Remember that with ‘The Case Law Compendium’ you can do it.

Electronic Signatures Neil