Lloyd's Maritime and Commercial Law Quarterly
Trusts as quasi-securities? The Law Commission’s proposals for the registration of security interests
J. A. Glister *
The Law Commission is currently engaged in a review of personal property security legislation in England and Wales. The Law Commission proposes to include not only fixed and floating charges within the new regime but also ‘‘quasi-securities’’ such as retention of title clauses. This article examines the operation of express declarations of trust and Quistclose trusts, both of which have the potential to provide security for creditors, and considers whether they should form part of the new system
.
I. INTRODUCTION
In July 2002 the Law Commission published a Consultation Paper on the registration of security interests.1
The proposals, which have been variously described as ‘‘a coherent and attractive scheme’’2
and a ‘‘major contribution to the law of security interests’’,3
recommended that the present system of registration of security interests should be abolished. In its place a scheme was proposed that would include a new first-to-file system for determining priorities, and that would also take account of such ‘‘quasi-securities’’ as retention of title (‘‘ROT’’) agreements. Commentators have already skilfully analysed the Law Commission’s proposals as regards these important suggestions.4
However, little has been said about the Law Commission’s views as to the position of trusts—including Quistclose
trusts5
—under their new regime.6
This author supports the Law Commission’s recommendation that express declarations of trust should be subject to notice-filing requirements when the devices amount to functional security interests, and it is also argued that the Law Commission was correct to suppose that Quistclose
trusts should remain outside the scope of the new system. However, it is suggested that the Law Commission’s reasons for their conclusions are
* Lecturer in Law, University of Durham. I would like to thank Janet Ulph and the anonymous referee for their helpful comments on earlier drafts of this paper. Of course, responsibility for errors is mine alone.
1. Registration of Security Interests: Company Charges and Property other than Land
: LCCP No. 164 (2002).
2. L. Gullifer, ‘‘Will the Law Commission sink the floating charge?’’ [2003] LMCLQ 125, 125.
3. G. McCormack, ‘‘‘Quasi-securities’ and the Law Commission Consultation Paper on security interests—a brave new world’’ [2003] LMCLQ 80, 80.
4. For a discussion on charges, see Gullifer [2003] LMCLQ 125; for a focus on ‘‘quasi-securities’’ see McCormack [2003] LMCLQ 80.
5. From the leading case, Barclays Bank Ltd
v. Quistclose Investments Ltd
[1970] AC 567.
6. McCormack [2003] LMCLQ 80, 93–94 makes some brief comments on the role of the Quistclose
trust, though not other trusts.
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