The Quistclose Doctrine: Resurrection of the Primary Trust?

Article on PECD Berhad (In Liquidation) v AmTrustee Berhad published in King’s Law Journal.


Dr. Liew Ying Khai, lecturer in the Dickson Poon School of Law, King’s College London, and Weng Tchung have co-authored an article which has now been published in the King’s Law Journal under the title “The Quistclose Doctrine: Resurrection of the Primary Trust?” (2014) 25 KLJ 8–18, commenting on the recent Federal Court decision in PECD Berhad (In Liquidation) v AmTrustee Berhad [2014] 1 MLJ 91, FC.

Extract from the article:


It is not uncommon for trusts cases decided in Commonwealth jurisdictions to affect the general development of the law of trusts. While as a matter of comparative law the jurisprudence of Malaysian courts has seldom received much attention, the recent decision in PECD Berhad (In Liquidation) v AmTrustee Berhad served as an occasion for the highest court in Malaysia to consider the Quistclose doctrine. Unusually, this case followed and applied the primary-secondary trust analysis of Lord Wilberforce in Barclays Bank Ltd v Quistclose Investments Ltd2 as the proper legal basis of the Quistclose trust in Malaysia. A careful inspection, however, reveals that the Federal Court’s decision reflects a distortion both of the specific facts of the case and of legal principle …”

“The misapplication and distortion of the Quistclose doctrine created by the decision in PECD seems to hark the demise of the Quistclose trust under Malaysian law, since the principles propounded by the Quistclose doctrine cease to have any real scope for application if ‘primary trusts’ do not fail even in the event of B’s insolvency. It is sincerely hoped that the decision in PECD will be overruled by the Federal Court of Malaysia at the earliest opportunity so as to avoid this manifestly undesirable development in the law. More importantly, it is hoped that the decision in PECD serves as an indication to Commonwealth jurisdictions how not to develop the Quistclose doctrine so as to avoid an irreconcilable distortion of trust principles.”

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