Triffitt Nurseries & Ors v Salads Etcetera Ltd & Ors

Commercial agents who are entitled to mix sale proceeds with their own money ordinarily hold those proceeds as debtors, not trustees. The appointment of administrative receivers and cessation of the agent’s trading do not automatically terminate the agency, divest the agent of its right to collect existing debts, or defeat a charge over those debts. A principal may nevertheless obtain proprietary relief where, in the circumstances, it would be wholly unconscionable for the receivers or secured creditor to resist the claim. The decision in Re Farrow’s Bank [1922] 1 Ch 51 was confined to its banking context and did not establish a general rule.

The claimants were vegetable growers who supplied produce to Salads Etcetera Ltd, a mercantile agent. Salads sold the produce, mixed the proceeds with its own funds and remained contractually accountable to the growers. The Royal Bank of Scotland held security over Salads’ assets and book debts.

Administrative receivers were appointed after Salads became insolvent. No further produce was received or sold, but the receivers collected more than £666,000 in trade debts arising from earlier sales. The growers claimed that the collected money was held on trust for them and was not subject to the bank’s charge. Longmore J dismissed the claim. The appeal concerned beneficial ownership, the effect of receivership on the agency relationship, and the costs consequences of notices to admit facts.

1. Appeal dismissed. The growers’ receipts were not impressed with a trust merely because receivers had been appointed and Salads had ceased trading. The agency arrangements entitled Salads, while trading, to mix receipts with its own money and use them for its own purposes, subject to a contractual duty to account. The growers therefore had the status of creditors rather than beneficiaries of identified funds.
2. Re Farrow’s Bank [1922] 1 Ch 51 was an authority of limited application. It concerned a bank’s suspension of payment and the loss of authority to complete collection of a cheque. It did not embody a general principle that an agent loses ownership of collected proceeds whenever its business ceases.
3. Even if the agency ended when the receivers were appointed, that fact alone did not alter Salads’ existing right to collect customer debts or the bank’s charge over those debts. The appointment of receivers did not automatically defeat those established proprietary rights.
4. The court accepted the approach in Neste Oy v Lloyds Bank [1983] 2 LLR 658: a disappointed principal may prevail where it would be wholly unconscionable for the receivers or secured creditor to resist the claim. The evidence did not establish conduct approaching sharp practice. The receivers had accepted no further produce and sold none after appointment, so there was no basis for a constructive trust or for treating them as having adopted the growers’ contracts.
5. The judge’s discretion on the costs consequences of notices to admit facts had not been exercised on a wrong principle or in a manner that was clearly wrong. The appeal was dismissed with costs, subject to detailed assessment. Leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division) [2000] EWCA Civ 134: appeal from the decision of Longmore J dismissed with costs.
• High Court, Chancery Division: claim for beneficial ownership of trade debts dismissed; decision reported at [1999] 1 AER (Comm) 110.