References:  Ch 399,  1 All ER 658
Coram: Sir John Pennycuick V-C
The court was asked as to the liability of an estate agent to account for interest earned upon a pre-contract deposit paid to him expressly as a stakeholder. No contract was made.
Held: A stakeholder is not a trustee or agent; he is a principal who owes contractual obligations to the depositors. A pre-contract deposit paid by a prospective purchaser was received subject to an obligation to repay the money on request unless and until a contract was concluded. Material considerations included that until the event was known the recipient was to keep the money in his own hands, but if the recipient employed the money he was entitled to any profit and answerable for any loss.
Sir John Pennycuick V-C said: ‘I propose, in the first place, to consider the law in relation to contract deposits. Looking at the position apart from authority, one might perhaps at first sight rather expect that where any property is placed in medio in the hands of a third party to await an event as between two other parties the third party receives that property as trustee, and that the property and the investments for the time being representing it represent the trust estate. Where the property is something other than money – for example, an investment – that must, in the nature of things, almost certainly be the position. But where the property is money – that is, cash or a cheque resulting in a bank credit – this is by no means necessarily so. Certainly the money may be paid to the third party as trustee, but equally it may be paid to him as principal upon a contractual or quasi-contractual obligation to pay the like sum to one or other of the parties according to the event. It must depend upon the intention of the parties, to be derived from all the circumstances, including any written documents, in which capacity the third party receives the money.’
This case is cited by:
- Cited – Rockeagle Ltd v Alsop Wilkinson CA ( Ch 47,  4 All ER 659)
The position of a stakeholder and the two potential claimants to a stake is the subject of a tripartite contract. The relationship between the stakeholder and the two potential claimants is contractual, not fiduciary. The money is not trust money. . .
- Cited – Manzanilla Limited v Corton Property and Investments Limited; John Maciver (Southport) Limited; Rootbrights Limited and Halliwell Landau (a Firm) CA (Bailii,  EWCA Civ 942)
Millett LJ set out the principles applicable to a deposit paid on a land transaction being held by a stakeholder: ”Where a stakeholder is involved, there are normally two separate contracts to be considered. There is first the bilateral contract . .