In Manning v 2 Four 6 Marketing Limited, the High Court provided an important overview of the principles to be considered when it is being argued that an implied trust has arisen over the assets of a company which has gone into administration.

In this case, the Applicants were the Joint Administrators of Festicket Limited (the “Administrators”) and the Respondents were event promoters who had contracted with Festicket Limited (the “Company”) for the latter to serve as their ticket agent. The preliminary issue  the Court was asked to address was whether a trust arose over the money that the Company received through ticket sales when acting as the Respondents’ agent under the Company’s standard agreement. The Respondents argued that an implied trust existed, due to the way the agency relationship was detailed in the agreement, whilst the Administrators argued to the contrary.

In her judgment, Deputy Insolvency and Companies Court Judge Raquel Agnello KC helpfully summarised the principles relating to implied trusts. These are as follows:

• There is not one factor that will determine whether an implied trust exists.
• When considering whether an implied trust exists, only the objective intentions of the parties will be taken into account. Notably, DICC Judge Raquel Agnello KC relied upon the following comments of Lord Millett in Twinsectra Limited v Yardley [2002] 2 AC 164:
• A settlor must, of course, possess the necessary intention to create a trust, but his subjective intentions are irrelevant. If he enters into arrangements which have the effect of creating a trust, it is not necessary that he should appreciate that they do so; it is sufficient that he intends to enter into them.
• Whilst the separation of funds is “one of the common characteristics of an implied trust” and a relevant factor, the absence of a term requiring such separation would not be “fatal” to the existence of a trust.
• An “important factor” is whether there was accountability on the part of the agent to the principal for the money it held on the principal’s behalf. However, this will not determine whether a trust exists, even though a lack of accountability is “unusual”.

DICC Judge Raquel Agnello KC then went on to reject several of the Respondents’ arguments. In particular, the argument that the existence of good faith provisions in an agreement, together with accounting and agency obligations, meant that a fiduciary relationship could be identified was rejected on the basis that such factors were not evidence for such a relationship. Provisions concerning the offsetting of sums and advances (or the lack of provisions for the latter) were also found not to support the existence of a trust.

The Court ultimately held that a trust did not exist over the sale proceeds. In DICC Judge Raquel Agnello KC's view, the most salient points in arriving at such a decision were the fact that the agreement in question did not specify how the sums that the Company held on the Respondents’ behalf were to be used. The length of the period during which the Company would be holding the money was seen as particularly important; the shortest period was 21 days. This length of time was, in turn, significant considering the non-segregation of the proceeds of ticket sales from the Company’s other funds. In the words of the Judge, “the ability of the company to retain sums for an extremely lengthy period without any required segregation is an important factor against any trust.”

DICC Judge Raquel Agnello KC’s approach represents a decidedly fact-specific approach to implied trusts. She highlighted that the Court would focus on the specific facts and underlying agreement before it in each case and that a range of factors were relevant, but not necessarily decisive. This case provides a useful overview and reminder of how the Court will approach implied trusts. The decision may lead to a complex body of case law, as judges subordinate precedent to facts, or a body of cases in which practitioners are likely to find, eventually, a factually analogous decision which is of direct use to the case before them.

The judgment can be read here.

Manning and Ors (in their Capacity as Joint Administrators of Festicket Ltd) v 2 Four 6 Marketing Ltd and Ors [2024] EWHC 1554 (Ch)