THE NATURE OF QUISTCLOSE TRUSTS: CLASSIFICATION AND RECONCILIATION

THE facts of Barclays Bank Ltd. v. Quistclose Investments Ltd. are well-known. In July 1964 Rolls Razor Ltd. declared a dividend payment that they were unable to meet. In order to meet their obligation, the company arranged to borrow the amount of the dividend, £210,000, from Quistclose Investments. The money was duly transferred into a separate account of Rolls Razor, opened specially for the purpose, held at Barclays Bank. The dividend was payable on 24 July but had not been paid when, on 27 August, Rolls Razor entered voluntary liquidation. Barclays and Quistclose both claimed the money. Barclays asserted a right of set-off against the Rolls Razor overdraft, while Quistclose claimed that the money was held in trust for them and, since Barclays were aware of this, the bank were accordingly constructive trustees of the funds.