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1 An Introduction to Equity the money wisely for themselves. As the trustee, Eoin would be expected to manage the property for the benefit of the children until they each reached 25. They could be given the income before they attained that age, but the capital would remain under Eoin’s control. This basic idea of letting somebody else manage property for the benefit of others explains why the trust has also proved to be so significant commercially. For example, investors may wish to rely on the expertise of fund managers to manage their money and so will be willing to transfer their money into an investment trust. The fund managers will be trustees who will use their financial expertise to ensure that the money is invested wisely for the benefit of the investors. Similarly, the pension is founded on the trust idea too. 106 Employees will pay their money into a pension fund, in which it will be managed by trustees for the benefit of the pensioners, who will start to receive income and capital benefits when they retire. 1.4.8 The potential significance of Equity Throughout this book many cases will be considered which will show that there remains great scope for Equity to provide solutions to difficult problems. For now, this will be il lustrated by reference to one case in which, although Equity was not able to assist on the particular facts, had those facts been slightly different (or, more accurately, had it been possible to prove certain key facts), Equity could have assisted. The case is Re Farepak Food and Gifts Ltd , 107 which arose from the insolvency of a company. Farepak Food and Gifts Ltd operated a Christmas savings scheme to enable people to spread their Christmas savings over the year. People participating in the scheme, who typ ically came from low-income families, would make monthly contributions; in November, they would receive a voucher, Christmas hamper, or other goods as they wished, to the value of the total amount credited to them. The average contribution was between £250 and £300. In October 2006, the company went into insolvent administration. It was unable to fulfil the Christmas orders for that year, meaning that many of its customers would not be able to get the Christmas food or presents that they had expected to obtain. The company had about £1 million credited to its account and the administrators of the company sought directions as to how this should be distributed. This came to the court on 15 December. If any of the customers were to get any of their food or presents for Christmas, they needed to show that the money held by the administrators belonged to them. They could not show that this belonged to them at Law, because legal title to the money had passed to the company. So they needed to show that they had a proprietary interest in the money in Equity to enable them to claim the money back. They could es tablish this if they could show that the money was held by the company on trust for them. Three different arguments were used in an attempt to show that the money was held on trust for the customers. The first argument was that there had been an express declara tion that the property was held on trust for the customers. The trial judge found that the directors of the company had indeed purported to declare a trust of the money that had been received from the customers, but that the wrong bank account had been identified. He was willing to rectify the deed of declaration, by means of the equitable remedy of rec tification, 108 so that it accorded with the directors’ intention. However, the declaration of trust involved the directors preferring some of the company’s creditors over others, which they are not allowed to do by operation of the law of insolvency. 109 Consequently, there had been no valid declaration of trust. © Oxford University Press

106 See further Section 3.6.2(ix), p. 63. 108 See Section 1.4.1(iv).3, p. 12.

107 [2006] EWHC 3272 (Ch).

109 See the Insolvency Act 1986, s. 239.

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