High Court ruling provides further guidance on use of Quistclose trusts

The English and Welsh High Court has handed down a decision which confirms that the relationship between creditors and debtors can only be elevated to a trustee-beneficiary relationship in exceptional circumstances.The High Court found that commission payable to Westbury Private Clients, an investment management company in liquidation, was not held on trust for investment introducer Gaudi Regulated Services. Instead the money formed part of Westbury’s assets.

The case is the second major decision relating to Quistclose trusts this year, following a March 2019 Court of Appeal (CoA) ruling in favour of Nigerian company Zumax. The CoA found international money transfers between bank accounts, executed by a clearing system or correspondent bank, do not give rise to a trust relationship in favour of the customer who gave the transfer instruction.

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