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1.5 Rights in Equity 19 The second argument was that the money had been paid for a particular purpose, namely the purchase of Christmas hampers and presents, and since that purpose had failed, the money was held by the company on what is known as a ‘resulting trust’ for the customers. 110 This argument failed because it could not be shown that the money that was received by the company was to be used for that particular purpose. 111 When the company received the money, it could do what it wanted with it; the money was not credited to a particular account for the purchase of goods on behalf of the customers. Rather than the customers owning anything in the company’s bank accounts, the company owed the value of what it had received to the customers. In other words, the relationship between the customers and the company was one of contract and not trust; it involved a debt and not property rights. The third argument was that the company had acted unconscionably in receiving the money from the customers after the directors had decided that the company would cease trading, so that the money was held on constructive trust for the customers, a trust that arose by operation of law. The judge noted that a trust could be recognized where the money had been received in such circumstances. However, it could not be established on the facts that the money had been received after the decision to cease trading had been made. 112 But, although it was of no help to the customers, there is at least the possibility of Equity securing a fair result in this type of case if it can be shown that a company has received money when it had already decided to cease trading. All of the customers’ arguments failed. It followed that, even though the judge expressed sympathy for the customers’ predicament, Equity could not help them. As the judge said: It will doubtless seem to some that the points which currently seem to stand in the way of what they propose are technical and unmeritorious. Some of them are certainly technical. But they are real points, I fear, and they arise out of the way that this company conducted its business. They must be disposed of properly and on the basis of law, not purely on the basis of sympathy and Christmas. 113 But, although the result seems unfair, the potential significance of Equity to reach a just result in this type of case is apparent. On different facts, perhaps only very slightly differ ent, an express trust, resulting trust, and especially a constructive trust might have been recognized to give the customers an equitable proprietary interest in the money that they had paid to the company. The recognition of such an interest would have meant that, since the money in the company’s bank account belonged to the customers, they would rank above other creditors on the company’s insolvency and so would be much more likely to recover what the company owed to them. 1.5 RIGHTS IN EQUITY At the heart of Equity is a fundamental division between the recognition and protection of property rights and personal rights. In a variety of situations, Equity will recognize that the claimant has an interest in property, or that the defendant is personally liable to pay the claimant a sum of money to compensate for loss suffered or to give up a gain made. © Oxford University Press

110 This is called a Quistclose trust after the case in which it was first recognized: Barclays Bank v Quistclose Ltd [1970] AC 567. See Section 8.4, p. 268. 111 For elaboration of this requirement, see Section 8.4.3(i), p. 270. 112 This was partly due to the limited time available to prepare and present arguments in court, because of the need to reach a decision in time for Christmas. 113 [2006] EWHC 3272 (Ch), [59] (Mann J).

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