Re Kayford Ltd - Detailed case brief, including page/paragraph references Topic: Trusts PDF

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Detailed case brief, including page/paragraph references
Topic: Trusts...

Description

Re Kayford Ltd Area of law concerned:

Equity- Resulting trusts

Court:

Chancery Division

Date:

1973

Judge:

Megarry J

Counsel: Summary of Facts:

The company carried on a mail-order business in bedding and stuff. The customers would pay some or all of the money in advance. Its supplier, Monaco Ltd, was in financial trouble. The company had already provided financial support to Monaco (80k pounds). Mr Kay, the managing director became concerned about customers who had paid in advance, as they may not get their goods that they had paid for. On 22 November Monaco told the company that they would have to go into liquidation unless it received further financial support. If this happened, it would have affected not only the company’s ability to deliver goods but also its solvency (due to the money already lent to Monaco). Consulting with accountants, he was advised to open a new account, called ‘Customers’ Trust Deposit Account’ and that all further moneys paid by customers for goods not yet delivered should be paid into this account, and withdrawn only when goods had been delivered. This was so that if the company had to go into liquidation, these sums could be refunded to those who had paid them. He did this. There is £37k in that account plus £48 interest. On December 6 Monaco ceased to make deliveries. On December 8 Mr Kay considered liquidation. On December 11 the company went into voluntary liquidation.

Relief sought: Issues:

The question for me is whether the money in the bank account (aside from the £48) is held on trust for those who paid it.

Relevant Statute(s): Procedural History: Plaintiff/Appellant’s arguments Defendant/Respondent’s arguments: Result: Judge’s reasoning:

In In re Nanwa Gold Mines Ltd the money was sent on the faith of a promise to keep it in a separate account, but there is nothing in that case or in any other authority suggesting that this is essential. [282]

From the outset the advice was to establish a trust account at the bank. The whole purpose of what was done was to ensure that the moneys remained in the beneficial ownership of those who sent them, and a trust is the obvious means of achieving this. 282

So this differentiates the customers from being mere customers. They are now beneficiaries. 282

The sender may create a trust by using appropriate words when the sends the money, or the company my do it by taking suitable steps on or before receiving the money. If either is done, the obligations in respect f the money are transformed from contract to property, from debt to trust. Easy to change relationship from contract to property 282

Payment into a separate bank account is a useful indication of intention to create a trust, but nothing is to prevent the company from binding itself by trust even if there are no effective banking arrangements. Quite a low threshold 282

What can be learned from this case....