If we
compare those two cases, Quistclose and Twinsectra, carefully, we will find that the concept of ‘primary
trust’ maybe problematic. The loan in Quistclose is for the purpose of paying dividend to shareholder. However, in Twinsectra, the loan is used for the purpose of buying some property.So, looking
at these two loans from the perspective of commercial practice. There should
not be any substantial difference.
Nevertheless, if
we want to apply the ‘primary trust’ concept, we can’t apply in a consistent way.
In the
Quistclose scenario, the
shareholders are the beneficiaries. But in the
Twinsectra scenario, the two-tier analysis is incapable to be applied, because
we can’t find any beneficiary other than the Lender. Thus, according to Lord
Millett, only one resulting trust is enough, there is no need to split into a
primary one and a secondary one.
Besides, there is another problem. Lets look at
this situation, where a lender said “I lend $100 to B to do its business. The purpose
that I lend the money to B is that B promised to me that I will get 10%
interests. So, in total, I can get $110. Otherwise, I wouldn’t lend
the money to B.”
Then, the question is that should a
Quistclose trust be imposed in this situation when the lender says he has a
purpose? If YES,
I believe every commercial loan has some purposes. If NO,
wouldn’t there be a risk to cause unfair preference?
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