Restitution Discussion Group Archives
| Sender: |
Charles Mitchell |
| Date: |
Thu, 26 Feb 2004 10:27:15 |
| Re: |
Latimer v IRC [2004] UKPC 14 |
In Twinsectra
Ltd v Yardley the HL all agreed that the money paid by Twinsectra
to Sims was held on trust for T, subject to a power to apply it by way
of loan to Yardley in accordance with the terms of the undertaking given
by S to T. This trust was clearly resulting in pattern, since it carried
the beneficial interest back to T, but there is some ambiguity in their
Lordships' treatment of the question whether this was an express trust
that came into existence because T had declared that it should, or a trust
imposed by law, responding to T's absence of intention to benefit S (or
Y) absolutely.
At [14]-[17] Lord Hoffmann reviewed the two reasons given
by Carnwath J first instance decision that there was no trust: (1) that
the terms of the undertaking were vague, and (2) that Twinsectra's 'moving
spirit', Ackermann, did not intend there to be a trust. Lord H rejected
these reasons on the grounds that (1) the power, to the exercise
of which T's equitable interest was subject, was sufficiently certain
under the Re Baden in-or-out test, and (2) Ackermann's understanding
was irrelevant because 'Whether a trust was created and what were its
terms must depend upon the construction of the undertaking.' Neither of
these findings takes us much further in our search for an answer to the
question was the trust an express trust or a trust imposed by law?
At [71], Lord Millett touched on the second of these
points in terms which are at least consistent with the view that the trust
was an express trust:
A settlor must, of course, possess the necessary intention
to create a trust, but his subjective intentions are irrelevant. If
he enters into arrangements which have the effect of creating a trust,
it is not necessary that he should appreciate that they do so; it is
sufficient that he intends to enter into them. Whether paragraphs 1
and 2 of the undertaking created a Quistclose trust turns on
the true construction of those paragraphs However, at [91]-[92], Lord Millett then notes the fact
that in Westdeutsche Lord B-W identified Quistclose
trusts as a type of resulting trust (i.e. resulting in pattern AND imposed
by law) and he also discusses Robert Chambers' book, and concludes that
'An analysis of the Quistclose trust as a resulting trust for
the transferor with a mandate to the transferee to apply the money for
the stated purpose sits comfortably with Dr Chambers' thesis, and it might
be thought surprising that he does not adopt it.' Then at [100] he holds
that 'the Quistclose trust to be an entirely orthodox example
of the kind of default trust known as a resulting trust. The lender pays
the money to the borrower by way of loan, but he does not part with the
entire beneficial interest in the money, and insofar as he does not it
is held on a resulting trust for the lender from the outset.'
On balance then, it seems that Lord Millett thought of
the trust for Twinsectra as a resulting trust imposed by law, and that
although Lord Hoffmann was a little hazy on the point, he says nothing
that contradicts this view, which is also consistent with Lord B-W in
Westdeutsche.
Further confirmation that this is the correct view now
comes from Lord Millett's decision in the Privy Council in Latimer
v IRC [2004] UKPC 14, available on-line at:
http://www.privy-council.org.uk/output/Page472.asp
This was a New Zealand case in which a trust was held
not to be a charitable trust because the trust deed specified that money
paid by the NZ government to the trustees for expenditure on the trust's
primary (and clearly charitable) purpose would result to the NZ government
in the event that the money was not spent. At [41] Lord Millett says:
The trust deed is an elaborate mechanism which serves
much the same purpose as a Quistclose trust: see Barclays
Bank Ltd v Quistclose Investments Ltd [1970] AC 567 and Twinsectra
Ltd v Yardley [2002] 2 AC 164 at paras. 13, 81 and 99-100. It allows
the Crown to make its funds available for a specified purpose and, insofar
as not required for that purpose, to remain throughout its own property:
see General Communications Ltd v Development Finance Corporation
of New Zealand Ltd [1990] 3 NZLR 406. The only difference is that
in the present case a resulting trust in favour of the settlor is express;
whereas it is more usually implied. The word 'implied' is itself unhelpful when applied to
trusts, since it can be used to mean implied-in-fact express trusts or
implied-in-law imposed trusts - but here I take Lord Millett to use it
in the latter sense!
Charles
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