Facts
Ms Paul and Mr Constance lived together as man and wife. Mr C received £950 compensation for an industrial injury and both parties agreed to put the money in a deposit account in Mr C’s name. On numerous occasions, both before and after the opening of the account, Mr C told Ms P that the money was as much hers as his. After Mr C’s death, Ms P claimed the fund from Mrs C, the administratrix.
Held
Mr C, by his words and deeds, declared himself a trustee for himself and Ms P of the damages. Accordingly, 50% of the fund was held upon trust for Ms P:
Scarman LJ: There is no suggestion of a gift by transfer in this case. [Counsel for the defendant argued] that there must be a clear declaration of trust, and that means there must be clear evidence from what is said or done of an intention to create a trust, or as counsel for the defendant put it, ‘an intention to dispose of a property or a fund so that somebody else to the exclusion of the disponent acquires the beneficial interest in it’. He submitted that there was no such evidence.
When one looks to the detailed evidence to see whether it goes as far as that – and I think that the evidence does have to go as far as that – one finds that from the time that Mr Constance received his damages right up to his death he was saying, on occasions, that the money was as much the plaintiff’s as his. When they discussed the damages, how to invest them or what to do with them, when they discussed the bank account, he would say to her: ‘The money is as much yours as mine.’ The judge, rightly treating the basic problem in the case as a question of fact, reached this conclusion. He said:
I have read through my notes, and I am quite satisfied that it was the intention of [the plaintiff] and Mr Constance to create a trust in which both of them were interested.
In this court the issue becomes: was there sufficient evidence to justify the judge reaching that conclusion of fact? In submitting that there was, counsel for the plaintiff draws attention first and foremost to the words used. When one bears in mind the unsophisticated character of Mr Constance and his relationship with the plaintiff during the last few years of his life, counsel for the plaintiff submits that the words that he did use on more than one occasion namely: ‘This money is as much yours as mine,’ convey clearly a present declaration that the existing fund was as much the plaintiff’s as his own. The judge accepted that conclusion. I think he was well justified in doing so and, indeed, I think he was right to do. There are, as counsel for the plaintiff reminded us, other features in the history of the relationship between the plaintiff and Mr Constance which support the interpretation of those words as an express declaration of trust. I have already described the interview with the bank manager when the account was opened. I have mentioned also the putting of the ‘bingo’ winnings into the account, and the one withdrawal for the benefit of both of them.
It might, however, be thought that this was a borderline case, since it is not easy to pinpoint a specific moment of declaration, and one must exclude from one’s mind any case built on the existence of an implied or constructive trust; for this case was put forward at the trial and is now argued by the plaintiff as one of express declaration of trust. It was so pleaded, and it is only as such that it may be considered in this court. The question, therefore, is whether in all the circumstances the use of those words on numerous occasions as between Mr Constance and the plaintiff constituted an express declaration of trust. The judge found that they did. For myself, I think he was right so to find. I therefore would dismiss the appeal.
In Re Kayford, a mail order company intended to create a trust of deposited sums for its customers.
Re Kayford Ltd [1975] 1 All ER 604, HC
Facts
A mail order company received advice from accountants as to the method of protecting advance payments of the purchase price or deposits for goods ordered by customers. The company was advised to open a separate bank account to be called ‘Customer Trust Deposit Account’ into which future sums of money received for goods not yet delivered to customers were to be paid. The company accepted the advice and its managing director gave oral instructions to the com- pany’s bank, but instead of opening a new account, a dormant deposit account in the company’s name was used for this purpose. A few weeks later, the company was put into liquidation. The question in issue was whether the sums paid into the bank account were held upon trust for customers who had paid wholly or partly for goods which were not delivered, or whether they formed part of the general assets of the company.
Held
A valid trust had been created in favour of the relevant customers in accordance with the inten- tion of the company and the arrangements effected. The position remained the same even though payment was not made into a separate banking account:
Megarry J: I feel no doubt that the intention was that there should be a trust. There are no formal difficulties. The property concerned is pure personalty, and so writing, though desirable, is not an essential. There is no doubt about the so called ‘three certainties’ of a trust. The subject matter to be held on trust is clear, and so are the beneficial interests therein, as well as the beneficiaries. As for the requisite certainty of words, it is well settled that a trust can be created without using the words ‘trust’ or ‘confidence’ or the like: the question is whether in substance a sufficient intention to create a trust has been manifested.
In Re Nanwa Gold Mines Ltd [1955] 1 WLR 1080 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 that I know of to suggest that this is essential. I feel no doubt that here a trust was created. From the outset the advice (which was accepted) 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. 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 sender 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. If either is done, the obligations in respect of the money are transformed from contract to property, from debt to trust. Payment into a separate bank account is useful (though by no means conclusive) indication of an intention to create a trust, but of course there is nothing to prevent the company from binding itself by a trust even if there are no effective banking arrangements.
Accordingly, of the alternative declarations sought by the summons, the second, to the effect that the money is held in trust for those who paid it, is in my judgment the declaration that should be made.
I should, however, add one thing. Different considerations may perhaps arise in relation to trade creditors; but here I am 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. In cases concerning the public, it seems to me that where money in advance is being paid to a company in return for the future supply of goods or services, it is an entirely proper and honourable thing for a company to do what this company did, on skilled advice, namely, to start to pay the money into a trust account as soon as there begin to be doubts as to the company’s ability to fulfil its obligations to deliver the goods or provide the services. I wish that, sitting in this court, I had heard of this occurring more frequently; and I can only hope that I shall hear more of it in the future.
Question
What evidence would the court take into consideration in deciding whether a person intended to create a trust?