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Lender? Borrower? Contemplated beneficiary? In suspension?
52Where is beneficial interest?Millett’s LQRarticle – beneficial interest remained throughout in lender.It is plain that the beneficial interest is not vested unconditionally in the borrower so as to leave the money at his free disposal – this would defeat purpose of arrangements – to prevent passing on insolvency. Contemplated beneficiary – the most serious objection – In several cases the primary trust was for an abstract purpose with no one but the lender to enforce performance or retrain misapplication of the money.
53Purpose trust?There is no reason to make an arbitrary distinction b/w money paid for an abstract purpose & money paid for a purpose which can be said to benefit an ascertained class of beneficiaries, & the cases rightly draw no such distinction.Any analysis of the Q trust must be able to accommodate gifts & loans for an abstract purpose.
54Failure of primary trustWhy shouldn’t creditor pay intended beneficiaries?If the borrower is treated as holding the money on resulting trust for the lender but with power (duty?) to carry out lender’s revocable mandate, & lender’s object in giving the mandate is frustrated, he is entitled to revoke the mandate & demand return of money which never ceased to be his beneficially.
55Millett’s one-trust analysisQuistclose trust is orthodox resulting trust.Lender pays money to borrower by way of loan.Lender does not part with entire beneficial interest – held on resulting trust for lender.Borrower has no beneficial interest – remains in lender subject to borrower’s power or duty to apply money in accordance with lender’s instructions.When purpose fails – money returnable to lender because resulting trust in his favour no longer subject to any power on part of borrower to make use of money.Whether borrower obliged to apply money for stated purpose - & whether lender can countermand borrower’s mandate – depends on circumstances.
56Millett’s one-trust analysisThe only trust is the resulting trust for the lender.The borrower is authorised to apply the money for a stated purpose, but this is a mere power & does not constitute a purpose trust.Like all resulting trusts, the trust in favour of the lender arises when the lender parts with the money on terms which do not exhaust the beneficial interest.It is not a contingent reversionary or future interest.
57Salvo v New Tel LtdNew Tel entered arrangement to acquire Digiplus.$2m raised by convertible notes issued to Salvo & ors.Prior to acquisition, notes held by NT’s solicitors in separate account.$1.15m transferred to account (NT already owed $850,000 to Salvo & ors – ‘set off’).$750,000 paid from NT a/c as deposit.Acquisition of Digiplus did not go ahead & money returned to NT.NT into liquidation. $400,000 repaid to S & ors.