Henry Charles Anderson & Anor v Andrew Craige Curtis & Ors

Master Bowles (sitting in retirement) :

1. This litigation arises out of a development project, which commenced in, or about, February 2014, whereby a redundant church, St George’s Church, in Kew, West London, was to be converted into a number of residential units. The developer was the Second Defendant, IDM West London Limited (IDM). The First Defendant, Andrew Curtis (Mr Curtis), is the sole director of IDM.

2. Funding for the development (the St George’s development) was provided, in part, by the Claimants, Henry Anderson and Howtel Limited (Howtel), by way of a loan, in the sum of £2,348,655. That loan was made up of funds provided by the Claimants, from a variety of sources, between February 2014 and January 2015, on the basis of development appraisals provided by IDM and Mr Curtis, between February and June 2014. The monies advanced included an amount of about £500,000, which had been retained from an earlier successful development, known as the Queensbridge development, in which the Claimants had previously invested. While a dispute exists as to the precise terms of the loan, specifically, as to whether it gave the Claimants protection against cost overruns in respect of the development, the core agreement, which is not in dispute, is that, in consideration of the loan, IDM would repay the loan and pay the Claimants one half of the profit arising from the development.

3. The loan has never been repaid and it is accepted by the Claimants that a contractual claim for the recovery of the sums advanced, or any profit to which they might have been entitled under the loan arrangements with IDM, is time barred.

4. It is IDM and Mr Curtis’ case that the St George’s development was a disaster. The redundant church which was the subject of the development turned out to have been built upon the site of an old chapel and graveyard and the discovery and, then, recovery from the graveyard of some seven hundred bodies halted the development for over eighteen months. That delay led to a substantial increase in the costs of finance, to the necessity of appointing, in the event, not one but two new contractors and to the development, eventually, in 2017, coming to fruition in the aftermath of the Brexit vote and the downturn in the London property market arising from the Brexit vote. Despite extensive marketing and price reductions, by the Autumn of 2017, none of the twenty one, or so, residential apartments within the development had been sold and IDM’s secured lenders were threatening to enforce their security by way of what would have been a calamitous ‘fire’ sale.

5. To meet this situation, the decision was made to sell off the apartments, at full market value and without what I understand is the conventional 15% discount attaching to a ‘bulk’ purchase of such properties, by way of the grant of long leases over each of the apartments in favour of the Third and Fourth Defendants, Gastony International Ltd (Gastony) and Moorhen Properties Ltd (Moorhen), being Gibraltar registered companies under the same ultimate control.

6. In order to acquire the long leases, Gastony and Moorhen secured mortgage finance from Secure Bank Trust Plc, which, in its turn, instructed Alsop LLP to provide ‘red book’ valuations of the properties and it is based upon those valuations, excluding the 15% discount that the price paid for the properties by Gastony and Moorhen was determined. That figure was £15,760,000, which, set against the costs of the development; those costs being £19,768,979.19 and resulting in a loss on the development of £3,948,976.19.

7. These proceedings were commenced by a Claim Form and Particulars of Claim issued and dated 7 July 2024.

8. The essence of the claim advanced is that the sum loaned to IDM by the Claimants was loaned for the purpose of carrying out the St George’s development and procuring the repayment of the loan and the Claimants’ agreed share of the profit to be derived from the development and that the advance of the loan monies, on that basis, gave rise to what is conventionally called a ‘Quistclose’ trust, such that beneficial ownership of the funds advanced remained with the Claimants, until such time as the funds had been applied for the purposes for which they had been advanced and such that, if not put to that purpose, or if that purpose was not achieved, beneficial ownership remained with the Claimants, or, as it is sometimes put, resulted back to the Claimants.

9. On that footing, the loan not having been repaid and no profit having been achieved, or paid, as agreed, the Claimants’ contention is that the purpose of the loan was not achieved, that, accordingly, they retained beneficial ownership of the monies advanced and can, therefore, trace their monies into the St George’s development, into the profits, if any, derived from that development and into assets derived from the development.

10. They assert, accordingly, that the loan monies having been used, along with other monies, for the purposes of the St George’s development, IDM, as the then owner of the development, held the development, to the extent that it derived from the use of the loan monies, and, it is said, the Claimants’ intended share of the profit arising from the development, on trust to repay to the Claimants the loan monies advanced, together with their share of the undistributed profits of the development. On that footing, IDM’s transfer of the residential units created by the development, by way of long leases granted in favour of Gastony and Moorhen, constituted a breach of trust, in respect of which the Claimants are entitled to equitable compensation in the sum advanced and in respect of their share of the profit.

11. It is further said that Mr Curtis, as the controlling mind of IDM and in instigating and encouraging IDM to grant long leases of the residential units, in breach of trust, dishonestly assisted in that breach and that, since he was also the controlling mind of Gastony and Moorhen, those companies were, to the extent that the leases derived from the Claimants’ monies, in knowing receipt of trust property.

12. By application notice dated 10 December 2024, Mr Curtis and IDM have applied, under CPR 24.2, for a determination that these proceedings have no realistic prospects of success and, therefore, that judgment be entered in their favour. It is their contention that there is no realistic prospect of the Claimants establishing at a trial that the St George’s development was ever subject to, or impressed with, the trust alleged by the Claimants, or any such trust.

13. By a further application notice, dated 28 May 2025, the Claimants apply, under CPR 17, for permission to amend their claim, as it relates to the Third and Fourth Defendants, by advancing, in addition to the existing claim in knowing receipt, a claim that they, like Mr Curtis, dishonestly assisted in IDM’s breach of trust.

14. This judgment relates to these applications

15. The basis of the application to amend, which was not the subject of any significant argument, or discussion, during the hearing leading to this judgment, was that the new claim in dishonest assistance arose out of the same, or substantially the same facts, as the existing claim and, therefore, that, notwithstanding that the new claim might otherwise be time barred, it arising from events in 2018, permission could and should be given for the amendment.

16. The reason why the amendment application was not subjected to serious argument, or discussion, is that it was accepted, on both sides, that the claims against Gastony and Moorhen, whether as pleaded, or as sought to be amended, are parasitic upon the Claimants’ core contention that the St George’s development was held on trust for the Claimants, as set out in paragraphs 9 and 10 of this judgment, and, consequently, that those assets, when transferred out of the St George’s development were so transferred in breach of trust.

17. It follows that, if that core contention fails and if the St George’s development, were not impressed with any trust in favour of the Claimants, then the transfers out of the development to the Third and Fourth Defendants would not have been transfers in breach of trust and no question, whether of knowing receipt, or dishonest assistance, could arise. The application to amend, even if, as I think, otherwise well founded, accordingly stands or falls upon the outcome of what I will call the primary application, namely whether the Claimants claim to a trust interest in the St George’s development can realistically be made out.

18. In resolving that question it is neither necessary nor possible to determine the many factual questions which arise as between these parties. The court cannot, at this stage, determine whether this was a loss making development, as alleged by Mr Curtis and IDM and as outlined in paragraphs 4, 5 and 6 of this judgment, or whether the motivation underlying the sale off of the development to Gastony and Moorhen was to avoid a calamitous ‘fire sale’ of the development, rather than, as alleged by the Claimants, taking the development offshore. Nor can it resolve the dispute as to the terms of the loan agreement, in respect of costs overruns, referred to in paragraph 2 of this judgment.

19. Correspondingly, the court cannot resolve whether, as contended by Mr Curtis and IDM, the contractual arrangements under which the loan monies were advanced by the Claimants were retrospectively superceded by interest bearing loan notes, thereby discharging any trust that might have arisen out of, or in respect of, the original arrangements, or whether, as the Claimants say, it was understood by all parties that the loan notes were not intended to alter, or modify, the existing arrangements between the parties, but were, as it was put, by the Claimants’ counsel, Mr de Waal KC, prepared for purposes of tax efficiency.

20. None of the foregoing, however, precludes the possible resolution, at this stage, of the question as to whether the Claimants have a realistic claim that the St George’s development was impressed with, or subject to, a ‘Quistclose’ resulting trust, whether in respect of the monies advanced, or the profit allegedly, or, potentially, derived from that advance.

21. If that question can be resolved at this stage, then there is no doubt that it should be. If no realistic claim can be established, then the court and the parties will be spared all the costs of a trial and the determination of all the factual disputes which arise between these parties, as outlined, at least in part, in the preceding paragraphs. If, however, a realistic claim can be advanced, or if, on analysis, there remain disputed factual questions, relevant to the determination as to whether a ‘Quistclose’ trust can realistically be established over the development, then the matter will have to proceed to a trial.

22. The circumstances in which a ‘Quistclose’ trust can arise and the nature of such a trust are now well established. This is not an area of developing law, where summary disposal might be inappropriate.

23. I have set out, in broad terms, the concept of a ‘Quistclose’ trust, in paragraph 8 of this judgment. In more technical terms and as definitively explained by Lords Millett and Hoffmann, in Twinsectra Ltd v Yardley , a ‘Quistclose’ trust is an entirely orthodox example of a resulting trust, under which, subject to the power given to the borrower, as trustee, to use the funds advanced for a particular purpose, those funds remain, at all times, in the beneficial ownership of the lender. If the power is properly exercised, in the sense that the funds are used for their specified and intended purpose, then the exercise of the power extinguishes, or discharges, the beneficial interest, previously retained by the lender, such that, thereafter, the lender retains no interest in the funds that he has advanced and is left with his normal remedies in debt. As explained by Lord Millett, in [2002] 2 AC 164 Twinsectra , at paragraph 72, trusts of this type are not intended to provide security for the repayment of the loan. Their purpose is to prevent the lender’s money being applied otherwise than in accordance with the lender’s wishes.

24. If, however, the power is improperly exercised, or not exercised at all, and if, therefore, the funds are not used for their intended and particular purpose, such as to discharge the lender’s beneficial interest, then that beneficial ownership is retained by the lender and the funds in question, until repaid, are held on resulting trust for the lender.

25. Whether a ‘Quistclose’ trust arises and, therefore, whether the arrangements between lender and borrower are subject to such a trust and to the consequences arising from such a trust, as last set out, will depend upon a number of factors.

26. Firstly, the existence, or otherwise, of such a trust will always depend upon the intention of the lender that the monies advanced will not be at the free disposal of the borrower, but must be used for a particular purpose. Secondly, that particular purpose must be defined with such sufficient certainty as to enable a court to determine whether the monies advanced have, or have not, been put to the particular purpose in respect of which they were advanced. Uncertainty, however, as explained by Lord Millett, at paragraph 101 of Twinsectra , works in favour of the lender not the borrower. If the use to which the money is to be put is uncertain, then, because it cannot be said to have been used for the given purpose, but, yet, was not at the free disposal of the borrower, then, under the resulting trust arising from the advance, the monies advanced must be returned to the lender.

27. In regard to the intention to create a ‘Quistclose’ trust, the court is not concerned with the subjective intentions of the lender, or even whether the lender appreciates, or, subjectively, intends to create such a trust. The trust arises if the arrangements entered into between lender and borrower have the effect of creating the trust. The only relevant intention is that the lender intends to enter into those arrangements ( Twinsectra paragraph 71 ).

28. In this case, unlike Twinsectra , there is no documentary material setting out the basis upon which the loan was advanced, or, in terms, the specific, or particular purpose, for which the loan monies were to be used. While reserving, therefore, the right to challenge, at any trial, the conclusion that the monies advanced were advanced for a specific purpose, such as not to be at the free disposal of IDM, it is rightly accepted by IDM and Mr Curtis, given that the monies were advanced against an appraisal of the costs and potential profits of the development, that it is a realistic inference that the monies were advanced for the purposes of making good the development and not for any other purpose

29. It is further accepted, that that purpose was of sufficient clarity as to enable the court to determine whether or not the monies were put to the particular purpose in respect of which they were advanced. In this regard, it is not in dispute but that the monies advanced were utilised, in their entirety, for purposes of the development.

30. It is, accordingly, accepted, for the purposes of the current application, that a valid ‘Quistclose’ trust came into being at the point when the loan monies were advanced and that, at that point, the lenders’ beneficial interest in the monies was not extinguished, or exhausted.

31. What is said, however, by IDM and Mr Curtis, is that, given that the entirety of the funds advanced went into the development and given, therefore, that the particular purpose for which the funds had been advanced was, thereby, achieved, the effect, or consequence, of the use of the funds for that purpose was to bring the ‘Quistclose’ trust to an end and to extinguish, or exhaust, the residual beneficial interest that the Claimants retained in the monies advanced prior to the funds being deployed within the development.

32. The necessary consequence, they submit, of the foregoing is that the Claimants can have no interest in the development, or in any assets derived from the development, or transferred out of the development and, further, that any dealings with the development, or its assets, did not and could not constitute a breach of trust. The Claimants’ proprietary, or beneficial, interest in the monies advanced came to an end when the monies were put to their intended purpose and they have, therefore no proprietary, or beneficial, interest to be traced into the development, or into assets derived from, or arising out of, the development, or such as to give rise to any breach of trust in respect of the development.

33. Mr de Waal KC, while acknowledging that the case he advances stands on the borderline of the possibilities pertaining to a ‘Quistclose’ trust, submits, nonetheless, that the terms upon which he submits monies were advanced in this case had the effect that the Claimants retained their equitable interest in the monies advanced even after the monies in question had been utilised, or deployed, in the development, such that they could trace their interest in the monies into the development and such that, in consequence, the development was held by IDM on trust to repay to the Claimants the monies that had been advanced by the Claimants, together with their share of any profit accruing from the development and with the result that any transfer of the development, or of assets forming part of the development, constituted a breach of that trust.

34. In regard to the potential width of a ‘Quistclose’ trust, Mr de Waal drew my attention to paragraph 99 of Lord Millett’s speech in Twinsectra and to the passage in that paragraph in which Lord Millett makes reference to the wide range of circumstances in which, in commercial arrangements, such as the present, are entered into in respect of which monies are advanced for a stated purpose, are not free to be applied for any other purpose and must be returned if, for any reason, the stated purpose cannot be achieved. His view was that rather than the court drawing distinctions between a ‘true’ Quistclose’ trust and trusts merely analogous thereto, the umbrella of a ’Quistclose’ trust should be applied to all such arrangements.

35. Mr de Waal also placed reliance upon the decision of the Court of Appeal, in Re EVTR Ltd (1987) 3 BCC 389 (CA) , as demonstrating the width of circumstances within which a ‘Quistclose’ trust, as now understood, could continue in existence.

36. In that case, shortly stated, monies had been advanced for the purchase of certain new equipment for a company already in financial difficulties. Although the monies in question were duly applied towards the purchase of the equipment the transaction was ultimately abortive, with the bulk of the monies being refunded to the company’s receivers. The question arose as to whether title to the monies had passed to the company or had remained vested in the person who had made the advance. The Court of Appeal concluded that, on ‘Quistclose’ principles, the purpose of the advance never having been achieved, the original trust under which the monies had been advanced had never come to an end, with the result that the equitable title to the monies advanced had, at all times, been retained by the lender such as to be traceable into the monies refunded and, once refunded, held on resulting trust for the lender.

37. I do not think that there is anything either in the passage in Twinsectra , upon which Mr de Waal places weight, or in EVTR , such as to extend, or modify, the principles, or circumstances, under which a ‘Quistclose’ trust can arise.

38. Accordingly, the question as to when title passes, in cases falling, as I have put it, under the ‘Quistclose’ umbrella, continues to be dictated, or determined, by a consideration as to the intended purpose for which money has been advanced and whether that intended purpose has been achieved and, in consequence, it follows that the result for which Mr de Waal contends, as set out in paragraph 33 of this judgment, is entirely dependent upon his being able to establish at a trial that the terms upon which the Claimants advanced monies to IDM and the intended purpose of that advance went beyond the use of those monies in the St George’s development, such that that use did not extinguish, or exhaust, the Claimants’ beneficial interest in the monies advanced.

39. The question, therefore, at this stage of the litigation, is whether there are realistic prospects of such terms being established. The answer to that question, in my view, is ‘no’.

40. The terms in question, as set out in paragraph 8 of this judgment and paragraph 8 of the Claimants’ Particulars of Claim are said to be that the monies were advanced for ‘the specific purpose of the Development and the subsequent repayment of the Loan and payment of the Profit’ to the Claimants.

41. As already stated, in paragraph 28 of this judgment, there is, in this case, no documentary material setting out, or establishing, explicitly, the terms upon which the Claimants’ loan was provided, or any specific purpose attaching to the use of the monies to be advanced. Nor was Mr de Waal able to point to any oral discussion between the parties such as to explicitly establish the terms for which he contends, or any thing in the background circumstances, or factual matrix such as to point to the existence of those terms. For example, there is no contention that the earlier and successful Queensbridge development was made on the terms now contended for, such that the parties must have intended to incorporate those terms into their next dealings.

42. It follows that the terms in question must, if they exist, be implied terms, arising out of the circumstances in which the loan monies were advanced.

43. As to that, as explained in paragraph 28 of this judgment, it is rightly accepted, given that the loan was advanced against and in the context of the appraisal provided by IDM and Mr Curtis, that it is a realistic inference that the monies were advanced for the specific purpose of their use in the St George’s development. I cannot see, however, that any further realistic inference is available. It cannot be said that the terms arise out of business necessity, or that the term contended for is, in any way, a norm, in respect of a commercial loan transaction of this nature. Nor can it be said that the terms contended for would be treated by the parties as applying as a matter of course.

44. This was, in essence, a straightforward commercial loan in respect of a property development, in respect of which the Claimant’s expectation was that they would receive repayment of their loan, together with a share in the profit of the development. There was no intention that the Claimants would take a share in the development, as a joint developer, or as a party to a joint venture, or that they would share in the risk of the development. Nor is there anything in the material before the court to suggest that the repayment of the loan together with the prospective profit was agreed as a charge on the development, such that the development, or its assets, stood as security for the loan.

45. There is, in short, nothing at all to take this case, taken at best for the Claimants, outside the usual ambit of a ‘Quistclose’ trust, or, therefore, to enable the Claimants to assert a trust interest in the development, or the assets of the development, or, therefore, to preclude IDM from dealing, in any way it wished, with the assets of the development.

46. The only potential ‘Quistclose’ trust, on the facts of this case, is the one conceded by IDM and Mr Curtis. That trust, however, came to an end when the monies advanced by the Claimants were utilised in the development and when, therefore, the specific purpose for which, potentially, those monies had been advanced had been fulfilled.

47. The consequence of that conclusion is that the Claimants’ claim has no realistic prospects of success, the application to amend must be dismissed and IDM and Mr Curtis succeed in their application that there be judgment in their favour and the claim dismissed.