Re Kayford Ltd
[1975] 1 WLR 279
Independent editorial summary — not the official judgment. Read the full judgment via the source link.
Ratio Decidendi
Where a company in financial difficulty segregates customer deposits into a separate trust account, those funds are held on trust for the customers and do not form part of the company's assets available to general creditors in a liquidation.
Facts
A mail order company, fearing insolvency, opened a separate bank account for customer deposits on the advice of its accountants.
Judgment Summary
Megarry J held the money in the separate account was held on trust for the customers. It was not available to the company's general creditors. The declaration of trust was valid even though the company was approaching insolvency.
Key Quotes
"I know of no reason why a company should not create a trust of its customers' prepayments."
— Megarry J
Subsequent Treatment
Standard authority on the creation of trusts to protect pre-payments in insolvency.
What To Do Next
Get Professional Help