Summary

It was clear that a firm of solicitors had held certain monies under a Quistclose trust and that therefore monies paid out of its client account for a purpose other than the stated purpose had been paid in breach of trust.

Facts

The claimant company (T) brought an action claiming that it was entitled to the payment of certain sums from an account of the respondent firm of solicitors (P). T had been approached to provide short-term funding for brownfield sites with the aim that it would be entitled to a share of the profits. T insisted on the provision of a solicitor's undertaking, which was provided by P. P undertook that, upon receipt of T's monies, P would use all reasonable efforts to purchase the site and place T's money into its client account. P further undertook that if the purchase was delayed the money would be placed into an interest-bearing account for T and T would be repaid on completion and onward sale within three months. The purchase price of the site was less than half the amount that T had been led to believe. Of the money paid into P's client account, less than half was used to purchase the site; some was paid to the Inland Revenue and other disbursements were made leaving a small balance in the account. T issued proceedings for compensation and a proprietary interest in the balance in P's client account. P accepted that when T paid the money to P, it was held by P on trust for T with T retaining beneficial ownership.

Held

From the terms of the undertaking it was plain that the money had been held under a Quistclose trust. There was a resulting trust in T's favour subject to a power on P's part to apply the money deposited for the purpose of completing the purchase of the site. P had had the limited use of T's money for a stated purpose. Therefore monies paid out of the client account that were for a purpose other than the completion of the purchase of the property were monies paid in breach of trust, Twinsectra Ltd v Yardley (2002) UKHL 12 , (2002) 38 EG 204 (CS) applied. T was entitled to judgment for the sums listed in its particulars and for the balance held in the client account.

Judgment for claimant.