Held: The Court of Appeal and the House of Lords both held the money, which was lent for a specific purpose and of which purpose the bank had notice, could not be retained by the bank; nor did it form part of the assets of the company for the purposes of insolvency. The money was returned to Quistclose Investments

• So money given for specific purposes will sometimes be held by the borrower on trust → this is a Quistclose trust

Facts: The claimant was a tobacco company and the defendant was an advertising agency. The agency purchased space on the company’s behalf. The company would pay the agency, who would pass the money on to the third parties from which it has purchased space. The advertising agency was in financial trouble, but the tobacco company wanted to continue doing business with it, mainly because the agency was able to negotiate significant discounts on advertising space.

• In July 1983, it was agreed that the agency should open a special account, into which the tobacco company would pay money to meet the costs of June’s bills, which the agency would pay by the end of July. The agency sent out cheques, but went into liquidation at the beginning of August. The liquidator immediately froze all the agency’s bank accounts and stopped the cheques.

Held: It was held that the money was impressed with a particular purpose, which was sufficient to impose a fiduciary obligation on the borrower. This obligation would, in line with well-established equitable principles, mean that, in the event of the purpose failing, the property would result to the settlor.

• So there was a Quistclose trust