pnBlawg

the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Why is a Quistclose trust like the tooth fairy?

If you objectively believe in its purpose it can provide a little prompt comfort during painful times.

 

The conjunction of festive films and Raymond Bieber v Teathers Ltd (In Liquidation) [2012] EWCA Civ 1466 brought that analogy to mind. Unfortunately the court found that the claimants did not objectively believe in the tooth fairy. The claimants invested in a scheme promoted to take advantage of tax reliefs available for expenditure on films or TV productions. T issued an Information Memorandum which summarised the scheme, its advantages and some of the risks. Each investor completed a subscription agreement, a power of attorney and provided a minimum investment of £25K. The investment was carried out through an unlimited partnership with T as the managing partner and was not successful. T is in liquidation and the only coin that could be put under the pillow is an insurance policy with a limit of £10m. The investors argued that the subscription monies were held by T on a Quistclose trust to apply the monies only in accordance with the investment criteria. Why didn’t the investors believe in the tooth fairy? Patten LJ when dismissing the investors’ appeal emphasised that the court must be satisfied that the parties intended that the transferred monies should continue to belong to the investors until the conditions attached to the release were complied with.

So because the investors did not believe in the tooth fairy, even though they put their investments under the pillow, no money was left for them… and even worse their investments had gone. Although they still have an equitable claim against T… so perhaps Santa Clause will leave them a present.

 

 

 

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