Re Kayford Ltd
A company that paid customers' advance payments into a separate account, intending to protect them, created a trust for the customers, so the money did not form part of its assets on insolvency.
Facts
Kayford ran a mail order business, and customers paid in advance for goods. When the company ran into financial difficulties, it took advice and opened a separate bank account, called the Customers' Trust Deposit Account, into which it paid the money received from customers, so that the money could be returned to them if the goods were not delivered. The company then went into liquidation, and the question was whether the money in the account belonged to the customers or to the company's general creditors.
Legal principle
Megarry J held that the money was held on trust for the customers. He said that a trust can be created without using the words trust or confidence, and that the question is whether, in substance, a sufficient intention to create a trust has been manifested. The company's actions in opening a separate account, for the purpose of protecting customers, showed such an intention. The fact that the account was not technically separate from the start, and that the money was paid in only shortly before liquidation, did not matter.
Related cases on certainty of intention and subject matter
- Re Adams and the Kensington Vestry (1884) 27 Ch D 394
- Boyce v Boyce (1849) 16 Sim 476
- Comiskey v Bowring-Hanbury [1905] AC 84
- Re Golay's Will Trusts [1965] 1 WLR 969
- Re Goldcorp Exchange Ltd [1995] 1 AC 74
- Hunter v Moss [1994] 1 WLR 452
- Jones v Lock (1865) LR 1 Ch App 25
- Knight v Knight (1840) 3 Beav 148
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