It means that the transferor must have intended to enter into arrangements which, viewed objectively, have the effect in law of creating a trust."
The name and trust comes from the House of Lords decision in Barclays Bank Ltd v Quistclose Investments Ltd (1970), although the underlying principles can be traced back further.
At least one textbook has been written dedicated solely to exploring issues around the true nature and classification of Quistclose trusts.
[2] A Quistclose trust is a method by which a creditor can hold a security interest in loans, through inserting a clause into the contract which limits the purposes for which the borrower can use the money.
This allows the moneylender to trace any inappropriately spent funds, and, in the case of the borrower's insolvency, prevents the money from being taken by creditors.
[11] The problems with this idea are that the facts in Quistclose are not those of a normal illusory trust, and Millett failed to consider the mutual intention of the parties and any underlying contracts.
[14] The problem with Wilberforce's analysis, as explained by Alastair Hudson, Professor of Equity and Finance Law at the University of Exeter, is that because the resulting trust only comes into existence after the misuse of the loan, it may come too late; if the money is not available when the claim is brought, there is no remedy.
In Quistclose situations, the requirement of "unconscionableness" could be met by the borrower using the money for a purpose other than the one for which it was lent, allowing the lender to claim an equitable interest in it.