Re Kayford Ltd [1975] 1 WLR 279

Key point

  • An express trust for advance payments for goods can be created by actions of the creditor


  • Customers of a company paid for goods advance of delivery
  • The company had had problems meeting orders and was advised by accountants to set up a special bank account to hold customers’ payment to allow for repayment to customers in the event the company went into liquidation
  • The company went into liquidation and the liquidators sought summons to determine whether money was held on trust for customers

Held (High Court)

  • The advance payments were held on express trust declared by the company for the customers

Megarry J

  • No doubt the general rule is that if you send money to a company for goods which are not delivered, you are merely a creditor of the company unless a trust has been created
  • The lender may create a trust by using appropriate words when he sends the money (though I wonder how many do this, even if they are equity lawyers), or the company may do it by taking suitable steps on or before receiving the money
  • Payment into a separate bank account is a useful (though by no means conclusive) indication of an intention to create a trust


  • No Quistclose trust as there is no specified purpose when the customers pay over their money
  • The case shows that lenders can create an express trust for money advanced rather than relying on the uncertain doctrine of Quistclose trust
Quistclose trust cases
Scroll to top