''Re Kayford Ltd (in liquidation)''

975 Year 975 ( CMLXXV) was a common year starting on Friday of the Julian calendar. Events By place Byzantine Empire * Arab–Byzantine War: Emperor John I raids Mesopotamia and invades Syria, using the Byzantine base at Antioch to pres ...

1 WLR 279 is a

UK insolvency law United Kingdom insolvency law regulates companies in the United Kingdom which are unable to repay their debts. While Bankruptcy in the United Kingdom, UK bankruptcy law concerns the rules for natural persons, the term ''insolvency'' is generall ...

and

English trusts law English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trust law, Trusts were a creation of the English law of English property law, property and English contract law, obligations, a ...

case, concerning the creation of a trust over payments made by consumers, in an insolvent company.

Facts

The

directors Director may refer to: Literature * ''Director'' (magazine), a British magazine * ''The Director'' (novel), a 1971 novel by Henry Denker * ''The Director'' (play), a 2000 play by Nancy Hasty Music * Director (band), an Irish rock band * ''D ...

of Kayford Ltd, a

mail order Mail order is the buying of goods or services by mail delivery. The buyer places an order for the desired products with the merchant through some remote methods such as: * Sending an order form in the mail * Placing an order by telephone call ...

business, were concerned about

insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet i ...

. They were receiving pre-payments for goods from their customers and were concerned about this being taken by other creditors. They got advice from their

solicitor A solicitor is a lawyer who traditionally deals with most of the legal matters in some jurisdictions. A person must have legally defined qualifications, which vary from one jurisdiction to another, to be described as a solicitor and enabled to p ...

s who said that they should open another account and deposit money from customers into that account. Suppliers of Kayford Ltd became insolvent, and soon Kayford Ltd also found it could not survive. It went into insolvent liquidation and the creditors claimed that the money in the accounts was part of the company’s assets. It was contended instead that the money was held in trust for Kayford’s customers.

Judgment

Megarry J held that the money was subject to a trust. It fulfilled all the requirements for the creation of a

trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust (law), a legal relationship in which one person holds property for another's benefit * Trust (bu ...

, including certainty of intention,

beneficiaries A beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example, the beneficiary of a life insurance policy is the person who receives the payment of the amount of ...

and subject matter. Although he said different considerations could apply to trade creditors, he was ‘concerned only with members of the public, some of whom can ill afford to exchange their money for a claim to a dividend in the liquidation, and all of whom are likely to be anxious to avoid this.’

Notes

{{reflist, 2

References

* United Kingdom insolvency case law High Court of Justice cases 1975 in United Kingdom case law