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ARTICLE · 16 FEBRUARY 2022

Keep friends Quistclose and your enemies Quistcloser

Corrs Chambers Westgarth
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The necessary elements of a Quistclose trust in the context of alleged unfair preferences discussed in a recent case.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Cameron Cheetham
Cameron Cheetham
Mark Wilks
Mark Wilks
Craig Ensor
Craig Ensor
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This week's TGIF considers the decision in Re BBY Limited (Receivers and Managers Appointed) (in liq) [2022] NSWSC 29, where the Court discussed the necessary elements of a Quistclose trust in the context of alleged unfair preferences.

Key Takeaways

  • In order for a Quistclose trust to be established, parties must have a mutual intention that the money provided be used only for the specified purpose. The Courts will assess this intention objectively.
  • Payments which can be properly characterised as the subject of a Quistclose trust will not be classified as a 'transaction' for the purpose of section 588FA of the Corporations Act.
  • Claims of retrospective solvency on the basis of the availability of funds from a related party must be supported with clear evidence of that party's willingness and ability to provide the funds at the relevant time.

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