Summary

The claimant company, who had set up trusts in anticipation of insolvency proceedings to safeguard customers' and suppliers' monies, remained the beneficial owners of the fund to the extent to which it had not effectively, by its declaration of trust, created benefical interests in the fund in favour of the beneficiaries.

Facts

Determination under RSC O.85 seeking a determination as to who was the beneficiary of two trusts. The claimant ('OT') traded as a retailer of computer products and accessories. Following losses and the prospect of almost inevitable insolvency proceedings, OT instructed Lloyds TSB to set up two separate trust accounts, the suppliers trust account and the customer trust account, "for the payment of customer deposits and payments due to urgent suppliers in order to safeguard such monies in the event of insolvency". Shortly after, an administration order in relation to OT was made and the business and the assets were sold to another computer company. In 2002, OT started proceedings under RSC O.85 seeking a determination of the questions as to who were the beneficiaries of the two trust accounts.

Held

(1) This was not a case analogous to Barclays Bank v Quistclose (1970) AC 567. There was no suggestion here that funds had been advanced to OT for a specific purpose. This was a case in which it was said that OT had declared itself trustee of certain funds to which it had been entitled in favour of the persons (the customers) who had originally transferred those funds to OT. So far as the suppliers were concerned, the case was one in which it was said that OT had declared itself trustee of certain of its funds for suppliers who had during the relevant periods granted OT credit in respect of supplies made by them to OT. (2) To the extent to which OT had not by its declaration of trust effectively created beneficial interests in the fund in favour of the beneficiaries, it followed that OT remained the beneficial owner of the fund. (3) The trusts alleged to have been created were necessarily express trusts and therefore needed certainty of words, certainty of subject matter, and certainty of objects. (4) When considering the threefold requirement of certainty, it was necessary to have regard to the underlying motive for the establishment of trusts. (5) On the evidence as a whole, there was no doubt that the directors had the necessary intention to create a trust, which comprised of money transferred out of the general funds of OT to the respective trust funds. (6) It was essential to distinguish between the suppliers trust and the customers trust. (7) As regards the customers trust, the customers were identified by receipts and there was no difficulty about identification of the beneficiaries. (8) In relation to the suppliers trust, it had never been properly constituted as the requirements for certainty of beneficiaries had not been met. (9) The sums held in the suppliers trust account were beneficially owned by OT.

Judgement accordingly.