“Company can create trust of customer deposits by segregation with clear trust intention.”
Kayford Ltd, a mail order company facing insolvency, segregated customer deposits into a separate bank account designated as trust money to protect customers if the company failed. The company later went into liquidation.
Whether the segregation of customer deposits into a separate account with trust intention created a valid trust protecting customers from the company's insolvency.
Megarry J held that a valid trust had been created, protecting the customer deposits from the company's creditors in the liquidation.
This case demonstrates how trusts can be created in commercial contexts to protect customer interests. It shows pragmatic judicial approach to trust creation and remains important for understanding consumer protection and corporate insolvency, influencing later developments in Quistclose trusts.
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OSCOLA Citation
Re Kayford Ltd [1975] 1 WLR 279 (Ch)
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