Article: Intention in Quistclose Trusts

Hui JING (Faculty of Law, The University of Hong Kong) recently published, Intention in Quistclose Trusts, 2024. Provided below is an Abstract:

This article examines the Hong Kong Court of Final Appeal’s decision in China Life Trustees Ltd v China Energy Reserve and Chemicals Group Overseas Co Ltd (China Life), which addresses the critical elements of intention and context in the establishment of Quistclose trusts. The court held that for a Quistclose trust to be established, the payor must intend—with the recipient’s agreement or acquiescence—that the funds be used solely for a specific purpose, without the need for the payor to expressly retain a beneficial interest in the transferred funds. Drawing on the China Life decision, the article further examines the inherent challenges of transparency and fairness arising from the concealed nature of Quistclose trusts, which may disproportionately disadvantage the borrower’s other creditors in the event of the borrower’s insolvency. Given the evolution of corporate rescue mechanisms and the increasing sophistication of modern financial transactions, the article argues that a reassessment of the continued recognition of Quistclose trusts is warranted. It proposes potential reforms, such as the mandatory registration of Quistclose arrangements, to strike a fair balance between the interests of Quistclose lenders and those of the borrower’s other creditors.

https://lawprofessors.typepad.com/trusts_estates_prof/2025/06/article-intention-in-quistclose-trusts.html