The bank lent money and required the directors of the borrower to provide guarantees and security by way of two term deposits in their own names. Another company of the directors borrowed money and deposited it with the bank for this purpose. When the loan had been repaid, the company sought the monies back from the bank, arguing that they were held on express trust or resulting trust.
The court said:
The focus of the enquiry is upon objective indications of intention, not subjective intentions which may have existed but are not apparent from what was said and done. The question as to the existence of any express trust will always have to be answered by reference to intention. It is clear that a trust will not necessarily arise in circumstances where money is lent for a particular purpose.
The court found that whilst the bank knew the money was to come from the company, and held cash deposits for the purpose of the guarantee, it was not enough to give rise to a trust. The court found the terms upon which the deposits were held required that the directors remained the beneficial owner of the deposits free of any interest of a third party. This was not consistent with a trust or with anyone else having a beneficial interest in the term deposits. Furthermore, the deposits were security for all the debts of the directors and inconsistent with anyone having the right to call for repayment once a particular loan in question was repaid. The term deposit application forms also did not show the directors signing as trustee.
The court also found this evidence sufficient to rebut any resulting trust. The court refused to order the bank to pay the funds to the company.
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