Legal Problems Of Developing Quistclose Trust In China

Quistclose trust has been widely applied in commercial practice in the United Kingdom since Barclays Bank Ltd v Quistclose Investments Ltd.Its special transactional structure,nature and functions demonstrated by the cases have raised great concerns and in-depth discussions.There are disputes on the questions whether the Quistclose relationship is a trust,what is the nature of the trust,who or what are the objects of trust,etc.In the background of Quistclose trust being applied worldwide,it is of great significance to do research on both comparative theories and practical applications related to it.In China,however,little attention has been paid to Quistclose trust.On one hand,the word of Quistclose has never been discovered in practice or any cases;on the other,scholars' discussions on it were confined to approvals of the court decision and the functions demonstrated by the cases.Even though,the writer found same structures in several cases of big commercial transactions,one of which was the Financial Loan Contract Disputes between Loan Huarong International Trust Co.Ltd.,SPD bank(Yuyao,Ningbo)and others.Although there was a trust relationship in the loan contract,the lender required the borrower to offer mortgages,pledges and guarantees as many as possible to guarantee the realization of its claim.What can be resulted from this mode of transaction is the large costs unavoidable.In addition,the trust relationship intended by the parties has been ignored.Therefore,if Quistclose trust could be established in these cases,the problems mentioned could have been avoided.The research methods mainly adopted by the writer here include comparative research method,historical research method and jurisprudential hermeneutic method,etc.Through these methods,the writer will examine the nature,the economic efficiency as well as the legal risks of Quistclose trust,and answer the questions of whether it is worthwhile to introduce Quistclose trust into China,whether it could be legally applied in the Chinese trust system,and for introducing this trust,how the Trust Law should perfect the related system as well as the rules.The paper will be divided into four parts:The first chapter will introduce the Quistclose case from which the Quistclose trust derived and other important precedents to illustrate its practical value overseas.The second chapter will be theoretical discussions on the aspects of its nature and objects,On the basis of which the writer will clarify the nature and characteristics of Quistclose trust.By clarifying,Quistclose trust should be a bare express trust with the following characteristics:(a)the parties have objective intentions to establish a Quistclose trust;(b)the lender imposes a special purpose for the use of money which restricts the borrower from disposing the money freely;(c)the borrower deposit the money in a separate account;(d)the lender has the power to instruct the trustee and can change and revoke his instructions;(e)when the purpose fails,the lender has the right to the repayment of the money.The next chapter will depart from commercial practice,comparing the trust with alienation guarantee and floating charge of bank account which have comparative functions in terms of economic efficiency and legal risks to comprehensively analyze the value of the introduction of Quistclose trust.By comparison,Quistclose trust has evident advantages in terms of economic efficiency and legality and therefore is more worthwhile to apply.The last chapter will study the rigid aspects of the present Trust Law from the angles of trust establishment and trust duties imposed on a trustee to facilitate the reform and development of the conventional theory of trusts and to find ways to construct a sound legal system for the Quistclose trust.From the angle of trust establishment,the writer holds the opinion that the Trust Law should prescribe the content related to the expression methods of “express” intentions,which should include the meanings of both “formal express” and “informal express”,the latter of which should be objectively construed,which means that when the parties have not expressed their intentions to set up a trust,the judge should make his every effort to find out the intentions from their agreement or other documents and the collected objective evidences.From the angle of trustee's duties,the writer disagrees that bare trust should be totally banned,instead,a more appropriate way to deal with it is to clarify and confine its range of application,comprehensively considering its functions in all aspects of the social life.On the aspect of system construction for the Quistclose trust in China,this trust can be legally applied by way of statutory interpretation,with only a few problems to be solved by way of legislation or amendment.And the latter would not conflict with the present trend of trust development,the legal practice of Trust Law or the legal trust system in China.